UP - Union Pacific Corporation

10/22/2026 | Press release | Distributed by Public on 10/22/2026 13:46

Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
RESULTS OF OPERATIONS
Three and nine months ended September 30, 2026, compared to
three and nine months ended September 30, 2025
For purposes of this report, unless the context otherwise requires, all references herein to "Union Pacific", "UPC", "Corporation", "Company", "we", "us", and "our" shall mean Union Pacific Corporation and its subsidiaries, including Union Pacific Railroad Company, which we separately refer to as "UPRR" or the "Railroad".
The following discussion should be read in conjunction with the Condensed Consolidated Financial Statements and applicable notes to the Condensed Consolidated Financial Statements, Item 1, and other information included in this report. Our Condensed Consolidated Financial Statements are unaudited and reflect all adjustments (consisting only of normal and recurring adjustments) that are, in the opinion of management, necessary for their fair presentation in conformity with accounting principles generally accepted in the United States of America (GAAP).
The Railroad, along with its subsidiaries and rail affiliates, is our one reportable business segment. Although revenues are analyzed by commodity, we analyze the net financial results of the Railroad as one segment due to the integrated nature of the rail network.
Critical accounting estimates
The preparation of these financial statements requires estimation and judgment that affect the reported amounts of revenues, expenses, assets, and liabilities. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. If these estimates differ materially from actual results, the impact on the Condensed Consolidated Financial Statements may be material. Our critical accounting estimates are available in Item 7 of our 2025 Annual Report on Form 10-K. During the first nine months of 2026, there have not been any significant changes with respect to our critical accounting estimates.
RESULTS OF OPERATIONS
Quarterly summary
The Company reported earnings of $3.49 per diluted share on net income of $2.1 billion and an operating ratio of 59.1% in the third quarter of 2026 compared to earnings of $3.01 per diluted share on net income of $1.8 billion and an operating ratio of 59.2% in the third quarter of 2025. Freight revenues increased 15% in the third quarter of 2026 compared to the third quarter of 2025 as higher fuel surcharge revenues, 6% volume growth, and core pricing gains more than offset the impact of unfavorable business mix (from higher intermodal carloads). Continued strong intermodal and grain and grain products shipments coupled with increased metals and minerals and energy and specialized market shipments more than offset declines in coal shipments.
Most of our key operating metric results improved in the third quarter of 2026 compared to 2025, even as carload volume increased 6%, reinforcing the importance of maintaining surge resources, operational execution, and the underlying fluidity of our network. Freight car velocity increased 1% and terminal dwell improved 2% compared to the third quarter of 2025. We optimized the transportation plan and leveraged capacity investments to handle 11% higher intermodal volume while effectively meeting increased grain and industrial products customer demand to improve system train length 2%. We demonstrated efficient utilization of our network resources in a growing demand environment by improving workforce productivity, while locomotive productivity was unchanged. Reflecting a comparison to our highest performance level in the last three years, both service performance index measures declined in the third quarter 2026 compared to one year ago, even as we continue delivering the service we sold our customers.
Operating expenses increased 15% compared to the third quarter of 2025 as locomotive fuel prices climbed to record levels amidst continued supply chain pressures, increasing average price per gallon 64% compared to last year. Volume-related costs, inflation, and higher depreciation also increased and were partially offset by productivity and lower acquisition-related expenses (see Note 18 to the Condensed Consolidated Financial Statements, Item 1). Operating income increased 15% to $2.9 billion, driven by top-line growth, while the operating ratio improved 0.1 points to 59.1% despite the headwind from higher fuel prices compared to the third quarter of 2025.
Operating revenues
Three months ended
September 30, 		Nine months ended
September 30,
Millions 2026 2025 Change 2026 2025 Change
Freight revenues $ 6,813 $ 5,927 15 % $ 19,224 $ 17,461 10 %
Other subsidiary revenues 201 172 17 570 547 4
Accessorial revenues 157 124 27 412 349 18
Other 26 21 24 72 68 6
Total $ 7,197 $ 6,244 15 % $ 20,278 $ 18,425 10 %
We generate freight revenues by transporting products from our three commodity groups. Freight revenues vary with volume (carloads) and average revenue per car (ARC). Changes in price, traffic mix, and fuel surcharges drive ARC. Customer incentives, which are primarily provided for shipping to/from specific locations or based on cumulative volume, are recorded as a reduction to operating revenues. Customer incentives that include variable consideration based on cumulative volume are estimated using the expected value method, which is based on available historical, current, and forecasted volume, and recognized as the related performance obligation is satisfied. We recognize freight revenues over time as shipments move from origin to destination. The allocation of revenues between reporting periods is based on the relative transit time in each reporting period with expenses recognized as incurred.
Other subsidiary revenues (primarily logistics operations) are generally recognized over time as shipments move from origin to destination. The allocation of revenues between reporting periods is based on the relative transit time in each reporting period with expenses recognized as incurred. Accessorial revenues are recognized at a point in time as performance obligations are satisfied.
Freight revenues increased 15% in the third quarter of 2026 compared to the same period in 2025 driven by higher fuel surcharge revenues, 6% carload growth, and core pricing gains, which more than offset an unfavorable business mix (from an increase in shipments with lower ARC, such as intermodal). Higher intermodal shipments, which increased 11% in the third quarter compared to one year ago, combined with strong metals and minerals, energy and specialized markets, and grain and grain products shipments were partially offset by lower coal shipments. Year-to-date 2026 freight revenues increased 10% compared to 2025 due to higher fuel surcharge revenues, 3% volume growth, and core pricing gains, partially offset by business mix (from increased intermodal shipments). Higher grain and grain products, intermodal, metals and minerals, and industrial chemicals and plastics shipments more than offset lower coal and automotive shipments.
Each of our commodity groups includes revenues from fuel surcharges. Freight revenues from fuel surcharge programs increased to $1.2 billion in the third quarter of 2026 compared to $602 million in the same period of 2025 due to higher fuel prices and increased volume.
Other subsidiary revenues increased in the third quarter of 2026 compared to 2025 due to higher demand for shipments at our subsidiary that brokers intermodal and transload logistics services, partially offset by lower revenues from the sale of a portion of revenue-generating assets in late 2025 from our technology subsidiary. Additionally, in the year-to-date period, other subsidiary revenues were negatively impacted from the transfer of commuter operations to Metra. Accessorial revenues increased in the third quarter and year-to-date periods of 2026 compared to 2025 driven by higher container, intermodal accessorial, and demurrage revenues.
The following tables summarize the year-over-year changes in freight revenues, revenue carloads, and ARC by commodity type:
Freight revenues Three months ended
September 30, 		Nine months ended
September 30,
Millions 2026 2025 Change 2026 2025 Change
Grain & grain products $ 1,085 $ 975 11 % $ 3,248 $ 2,889 12 %
Fertilizer 234 227 3 687 638 8
Food & refrigerated 272 258 5 791 785 1
Coal & renewables 525 470 12 1,459 1,355 8
Bulk 2,116 1,930 10 6,185 5,667 9
Industrial chemicals & plastics 701 647 8 2,041 1,900 7
Metals & minerals 666 568 17 1,842 1,650 12
Forest products 371 327 13 1,045 988 6
Energy & specialized markets 771 652 18 2,158 1,950 11
Industrial 2,509 2,194 14 7,086 6,488 9
Automotive 671 604 11 1,934 1,817 6
Intermodal 1,517 1,199 27 4,019 3,489 15
Premium 2,188 1,803 21 5,953 5,306 12
Total $ 6,813 $ 5,927 15 % $ 19,224 $ 17,461 10 %
Revenue carloads Three months ended
September 30, 		Nine months ended
September 30,
Thousands 2026 2025 Change 2026 2025 Change
Grain & grain products 225 215 5 % 710 645 10 %
Fertilizer 55 58 (5) 161 162 (1)
Food & refrigerated 40 41 (2) 121 127 (5)
Coal & renewables 209 216 (3) 599 606 (1)
Bulk 529 530 - 1,591 1,540 3
Industrial chemicals & plastics 185 182 2 549 528 4
Metals & minerals 209 193 8 588 558 5
Forest products 54 52 4 156 155 1
Energy & specialized markets 158 147 7 459 439 5
Industrial 606 574 6 1,752 1,680 4
Automotive 202 199 2 595 603 (1)
Intermodal [a] 956 860 11 2,601 2,551 2
Premium 1,158 1,059 9 3,196 3,154 1
Total 2,293 2,163 6 % 6,539 6,374 3 %
Average revenue per car Three months ended
September 30, 		Nine months ended
September 30,
2026 2025 Change 2026 2025 Change
Grain & grain products $ 4,837 $ 4,532 7 % $ 4,577 $ 4,478 2 %
Fertilizer 4,256 3,875 10 4,267 3,929 9
Food & refrigerated 6,678 6,306 6 6,524 6,199 5
Coal & renewables 2,516 2,181 15 2,437 2,237 9
Bulk 4,004 3,641 10 3,889 3,680 6
Industrial chemicals & plastics 3,789 3,548 7 3,717 3,598 3
Metals & minerals 3,185 2,944 8 3,134 2,959 6
Forest products 6,911 6,315 9 6,706 6,363 5
Energy & specialized markets 4,857 4,462 9 4,695 4,445 6
Industrial 4,136 3,828 8 4,044 3,863 5
Automotive 3,324 3,027 10 3,251 3,011 8
Intermodal [a] 1,586 1,393 14 1,545 1,368 13
Premium 1,889 1,701 11 1,862 1,682 11
Average $ 2,971 $ 2,740 8 % $ 2,940 $ 2,740 7 %
[a]For intermodal shipments each container or trailer equals one carload.
Bulk - Bulk includes shipments of grain and grain products, fertilizer, food and refrigerated, and coal and renewables. Freight revenues from bulk shipments increased 10% in the third quarter of 2026 compared to 2025 driven by higher fuel surcharge revenues and core pricing gains on essentially flat volume. Lower wheat and soybean meal volume, lower coal shipments due to low natural gas prices and elevated plant inventories, and lower fertilizer shipments offset continued export grain strength in addition to higher renewable fuels, ethanol, and associated feedstock shipments. For the year-to-date periods of 2026 compared to 2025, freight revenues from bulk shipments increased 9% from higher fuel surcharge revenues, 3% volume growth from higher grain and grain product shipments, and core pricing gains, partially offset by business mix (from lower food and refrigerated carloads).
Industrial - Industrial includes shipments of industrial chemicals and plastics, metals and minerals, forest products, and energy and specialized markets. Freight revenues from industrial shipments increased in the third quarter and year-to-date of 2026 compared to 2025 due to increased volume, core pricing gains, and higher fuel surcharge revenues, partially offset by business mix (from higher plastics and rock shipments). While all industrial business teams contributed to the 6% volume increase for the third quarter of 2026 compared to 2025, increased domestic steel, construction project-related material, and plastics demand in addition to business development efforts for higher petroleum and lumber shipments primarily drove the growth. Year-to-date carloads improved 4% as increased demand for industrial chemicals and plastics and construction project-related materials coupled with business development efforts, more than offset reduced soda ash export shipments.
Premium - Premium includes shipments of finished automobiles, automotive parts, and merchandise in intermodal containers, both domestic and international. Premium freight revenues increased 21% and 12%, respectively, in the third quarter and year-to-date periods of 2026 compared to 2025 driven by higher fuel surcharge revenues, volume growth, and core pricing gains, partially offset by business mix (from higher intermodal shipments). In the third quarter of 2026, intermodal volume increased 11% with continued strong domestic intermodal growth driven by business development and reduced truck market capacity, as well as, higher international intermodal carloads due to improving U.S. West Coast import volume and business development efforts. In addition, automotive shipments improved 2% in the third quarter of 2026 due to higher auto parts shipments resulting from business development efforts. Year-to-date 2026 intermodal volume increased 2% compared to 2025 as a 13% increase in domestic intermodal shipments more than offset a 12% decline in international intermodal carloads as a result of elevated U.S. West Coast imports in the first half of 2025. Automotive shipments decreased 1% in the year-to-date periods of 2026 compared to 2025 from lower production as a result of weaker finished vehicle demand, which offset business development efforts.
Mexico business - Freight revenues from each of our commodity groups includes revenues from shipments to and from Mexico, which increased 9%, to $820 million, in the third quarter of 2026 driven by fuel surcharge revenues and 4% volume growth from increased intermodal, finished vehicles, and construction-related shipments, partially offset by lower grain and forest product shipments. For the year-to-date period of 2026, Mexico freight revenues increased 7% to $2.4 billion compared to 2025 driven by higher fuel surcharge revenues and volume growth. Increased intermodal, finished vehicles, and grain products shipments more than offset lower petroleum, auto parts, beverage, and metals shipments, resulting in 4% volume growth.
Operating expenses
Three months ended
September 30, 		Nine months ended
September 30,
Millions 2026 2025 Change 2026 2025 Change
Compensation and benefits $ 1,264 1,214 4 % $ 3,731 $ 3,675 2 %
Fuel 1,040 616 69 2,621 1,795 46
Purchased services and materials 746 683 9 2,128 1,956 9
Depreciation 643 618 4 1,914 1,841 4
Equipment and other rents 206 212 (3) 639 683 (6)
Other 355 352 1 1,081 1,030 5
Total $ 4,254 $ 3,695 15 % $ 12,114 $ 10,980 10 %
Operating expenses increased 15% compared to the third quarter of 2025 due to higher fuel prices, volume-related costs, inflation, and higher depreciation expense, which was partially offset by productivity and lower acquisition-related expenses (see Note 18 to the Condensed Consolidated Financial Statements, Item 1). For the year-to-date period of 2026, operating expenses increased 10% due to higher fuel prices, inflation, volume-related costs, depreciation, and acquisition-related expenses. These increases were partially offset by productivity and positively impacted by a $55 million crew staffing agreement ratification charge in 2025.
Compensation and benefits - Compensation and benefits include wages, payroll taxes, health and welfare costs, pension costs, and incentive costs. Compensation and benefits expense increased 4% and 2% for the third quarter and the year-to-date period of 2026 compared to 2025, respectively, as wage inflation, higher incentive compensation, and training costs were partially offset by lower employee levels. Additionally, the year-to-date comparison was positively impacted by a $55 million 2025 crew staffing agreement ratification charge.
Fuel - Fuel includes locomotive fuel and gasoline for highway and non-highway vehicles and heavy equipment as well as the associated taxes and transportation costs. Fuel expense increased in both the third quarter and year-to-date periods of 2026 compared to the same periods in 2025 driven by higher locomotive diesel fuel prices and increased gross ton-miles, partially offset by improvement in the fuel consumption rate (computed as gallons of fuel consumed divided by gross ton-miles in thousands), which improved 2% in both respective periods. Locomotive diesel fuel prices averaged $4.21 and $3.59 per gallon in the third quarter and year-to-date periods of 2026, respectively, compared to $2.56 and $2.49 per gallon in the corresponding respective periods of 2025.
Purchased services and materials - Expense for purchased services and materials includes the costs of services purchased from outside contractors and other service providers (including equipment maintenance and contract expense incurred by our subsidiaries for external transportation services); materials used to maintain the Railroad's lines, structures, and equipment; costs of operating facilities jointly used by UPRR and other railroads; transportation and lodging for train crew employees; trucking and contracting costs for intermodal containers; leased automobile maintenance expense; and tools and supplies. Purchased services and materials increased 9% in the third quarter and year-to-date period of 2026 compared to 2025 driven by higher subsidiary and intermodal volume-related costs and inflation. For the third quarter of 2026, lower acquisition-related costs more than offset the increased costs associated with maintaining a higher active fleet. Year-to-date, increased acquisition-related costs contributed to a portion of the year-to-date expense increase.
Depreciation - The majority of depreciation expense relates to road property, including rail, ties, ballast, and other track material. Depreciation expense increased 4% for both the third quarter and year-to-date periods of 2026 compared to 2025 driven by a higher depreciable asset base.
Equipment and other rents - Equipment and other rents expense primarily includes rental expense that the Railroad pays for freight cars owned by other railroads or private companies; freight car, intermodal, and locomotive leases; and office and other rent expense, offset by equity income from certain equity method investments. Equipment and other rents expense decreased 3% and 6%, respectively, in the third quarter and year-to-date periods of 2026 compared to 2025 driven by lower operating equipment lease expense and lower car hire expense from shorter haul length and volume-related incentives. These declines were partially offset by increased demand in business (primarily intermodal and construction project-related materials) utilizing freight cars owned by others and favorable 2025 contract settlements. Year-to-date, improved cycle times also contributed to lower equipment and other rents expense, although it was partially offset by lower equity income compared to 2025.
Other - Other expense includes state and local taxes; freight, equipment, and property damage; utilities; insurance; personal injury; environmental remediation; employee travel; telephone and cellular; computer software; bad debt; and other general expenses. Other expense increased 1% and 5%, respectively, in the third quarter and year-to-date periods of 2026 compared to 2025 driven by higher environmental and destroyed equipment casualty costs and other general expenses, which were partially offset by lower personal injury costs, property tax expense, and bad debt expenses. The year-to-date period of 2026 was also impacted by higher damaged freight costs.
Non-operating items
Three months ended
September 30, 		Nine months ended
September 30,
Millions 2026 2025 Change 2026 2025 Change
Other income, net $ 95 $ 96 (1)% $ 291 $ 297 (2)%
Interest expense (312) (327) (5) (945) (984) (4)
Income tax expense (650) (530) 23 (1,740) (1,468) 19
Other income, net - Other income decreased in both the third quarter and year-to-date periods of 2026 compared to 2025 driven by higher non-operating property environmental remediation costs and lower real estate income, partially offset by increased interest income. See Note 6 to the Condensed Consolidated Financial Statements, Item 1, for additional detail.
Interest expense - Interest expense decreased in both the third quarter and year-to-date periods of 2026 compared to 2025 due to lower weighted-average debt levels, partially offset by higher effective interest rates. The effective interest rate was 4.3% for the third quarter of 2026 and 4.2% for the year-to-date period of 2026 compared to 4.1% for both respective 2025 periods. The weighted-average debt levels were $30.3 billion and $32.2 billion for the third quarter of 2026 and 2025, respectively, and $30.8 billion and $32.2 billion for the nine month period of 2026 and 2025, respectively.
Income tax expense - Income tax expense increased 23% and 19%, respectively, in the third quarter and year-to-date periods of 2026 compared to 2025. The increase in income tax expense in both periods is driven by higher pre-tax income and lower deferred tax adjustments. In the year-to-date period of 2026, changes in state tax laws and other state tax matters in the second quarter resulted in a $27 million reduction in deferred tax expense. Comparatively, the year-to-date period of 2025 included a $115 million reduction in deferred tax expense in the second quarter from legislation enacted in the state of Kansas to modify the corporate income tax apportionment. Our effective tax rates were 23.8% and 22.9% for the third quarter of 2026 and 2025, respectively, and 23.2% and 21.7% for the nine month period of 2026 and 2025, respectively.
OTHER OPERATING/PERFORMANCE AND FINANCIAL STATISTICS
We report a number of key performance measures weekly to the STB. We provide these on our website at https://investor.unionpacific.com/key-performance-metrics.
Operating/performance statistics
Management continuously monitors these key operating metrics to evaluate our operational efficiency in striving to deliver the service product we sold to our customers.
Railroad performance measures are included in the table below:
Three months ended
September 30, 		Nine months ended
September 30,
2026 2025 Change 2026 2025 Change
Gross ton-miles (GTMs) (billions) 232.5 223.0 4% 678.3 656.1 3%
Revenue ton-miles (billions) 114.1 108.9 5 335.5 320.4 5
Freight car velocity (daily miles per car) 228 226 1 231 220 5
Average train speed (miles per hour) [a] 24.3 24.2 - 24.8 23.9 4
Average terminal dwell time (hours) [a] 19.9 20.4 (2) 19.8 21.3 (7)
Locomotive productivity (GTMs per horsepower day) 140 140 - 142 139 2
Train length (feet) 9,969 9,801 2 9,871 9,661 2
Intermodal service performance index (%) 92 98 (6) pts 95 97 (2) pts
Manifest service performance index (%) 93 100 (7) pts 95 98 (3) pts
Workforce productivity (car miles per employee) 1,219 1,165 5 1,186 1,126 5
Total employees (average) 28,540 28,871 (1) 28,658 29,576 (3)
Operating ratio (%) 59.1 59.2 (0.1) pts 59.7 59.6 0.1 pts
[a]As reported to the STB.
Gross and revenue ton-miles - Gross ton-miles are calculated by multiplying the weight of loaded and empty freight cars by the number of miles hauled. Revenue ton-miles are calculated by multiplying the weight of freight by the number of rate miles. Gross ton-miles increased 4% while revenue ton-miles increased 5% in the third quarter of 2026 compared to 2025 and corresponding carloads increased 6%. For the year-to-date period of 2026 compared to 2025, gross ton-miles increased 3% and revenue ton-miles increased 5% while corresponding carloads increased 3%. The variance in gross ton-miles, revenue ton-miles, and carloads was driven by changes in business mix. In the third quarter of 2026, business mix was impacted by higher intermodal shipments, which are generally lighter, while the year-to-date business mix was affected by higher grain shipments that are generally heavier.
Freight car velocity - Freight car velocity measures the average daily miles per car on our network. The two key drivers of this metric are the speed of the train between terminals (average train speed) and the time a rail car spends at the terminals (average terminal dwell time). Freight car velocity increased 1% and 5%, respectively, in the third quarter and year-to-date periods of 2026 compared to 2025 driven by reduced terminal dwell combined with improved train speed in both periods.
Locomotive productivity - Locomotive productivity is gross ton-miles per average daily locomotive horsepower available. In the third quarter of 2026, locomotive productivity remained consistent with 2025 as the active fleet increased 2% to support 4% higher gross ton-miles while maintaining network fluidity and asset efficiency. For the year-to-date period, locomotive productivity improved 2% compared to 2025, with a 1% smaller active fleet handling 3% more gross ton-miles.
Train length - Train length is the average maximum train length on a route measured in feet. Train length increased 2% in the third quarter and year-to-date periods of 2026 compared to 2025 due to train length improvement initiatives, including optimization of the transportation plan and mainline capacity investments, enabling us to efficiently handle increasing carload volume.
Service performance index (SPI) - SPI is a ratio of the service customers are currently receiving relative to the best monthly performance over the last three years. Measuring our performance relative to a historical benchmark demonstrates our focus on continuously improving service for our customers. Our SPI is calculated for intermodal and manifest products. For the third quarter and year-to-date periods of 2026, both SPI measures declined compared to the respective 2025 period as a result of a comparison against a higher benchmark standard. Intermodal SPI declined 6 points and 2 points, respectively, in the third quarter and year-to-date periods of 2026 compared to 2025 while manifest SPI declined 7 points and 3 points, respectively.
Workforce productivity - Workforce productivity is average daily car miles per employee. Workforce productivity improved 5% in the third quarter and year-to-date periods of 2026, respectively, compared to 2025. Lower employee levels, which declined 1% and 3%, respectively, combined with higher average daily car miles enabled the improvement. We continually align our active train, engine, and yard (TE&Y) workforce to meet customer demands while operating a fluid network.
Operating ratio - Operating ratio is our operating expenses reflected as a percentage of operating revenues. For the third quarter of 2026, our operating ratio of 59.1% improved 0.1 points as top-line growth from increased volume and core pricing gains, productivity, and lower acquisition-related costs offset the impact of higher fuel costs and inflation. The year-to-date 2026 operating ratio of 59.7% deteriorated 0.1 points as the impact of higher fuel prices, inflation, and acquisition-related expenses more than offset core pricing gains, productivity initiatives, and the positive comparison from the $55 million crew staffing agreement ratification charge in 2025.
Debt / net income
Millions, except ratios
for the trailing twelve months ended [1] 		Sep. 30,
2026 		Dec. 31,
2025
Debt $ 30,324 $ 31,814
Net income 7,618 7,138
Debt / net income 4.0 4.5
Adjusted debt / adjusted EBITDA
Millions, except ratios
for the trailing twelve months ended [1] 		Sep. 30,
2026 		Dec. 31,
2025
Net income $ 7,618 $ 7,138
Add:
Income tax expense 2,300 2,028
Depreciation 2,538 2,465
Interest expense 1,270 1,309
EBITDA $ 13,726 $ 12,940
Adjustments:
Other income, net (623) (629)
Interest on operating lease liabilities [2] 33 40
Adjusted EBITDA (a) $ 13,136 $ 12,351
Debt $ 30,324 $ 31,814
Operating lease liabilities 788 1,008
Adjusted debt (b) $ 31,112 $ 32,822
Adjusted debt / adjusted EBITDA (b/a) 2.4 2.7
[1]The trailing twelve months income statement information ended September 30, 2026, is recalculated by taking the twelve months ended December 31, 2025, subtracting the nine months ended September 30, 2025, and adding the nine months ended September 30, 2026.
[2]Represents the hypothetical interest expense we would incur (using the incremental borrowing rate) if the property under our operating leases were owned or accounted for as finance leases.
Adjusted debt (total debt plus operating lease liabilities plus after-tax unfunded pension and OPEB (other post-retirement benefit) obligations) to adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, and adjustments for other income and interest on present value of operating leases) is considered a non-GAAP financial measure by SEC Regulation G and Item 10(e) of SEC Regulation S-K and may not be defined and calculated by other companies in the same manner. We believe this measure is important to management and investors in evaluating the Company's ability to sustain given debt levels (including leases) with the cash generated from operations. In addition, a comparable measure is used by rating agencies when reviewing the Company's credit rating. Adjusted debt to adjusted EBITDA should be considered in addition to, rather than as a substitute for, other information provided in accordance with GAAP. The most comparable GAAP measure is debt to net income ratio. The tables above provide reconciliations from net income to adjusted EBITDA, debt to adjusted debt, and debt to net income to adjusted debt to adjusted EBITDA. At September 30, 2026, and December 31, 2025, the incremental borrowing rate on operating leases was 4.2% and 4.0%, respectively. Pension and OPEB were funded at September 30, 2026, and December 31, 2025.
LIQUIDITY AND CAPITAL RESOURCES
Financial condition
Cash flows
Millions, for the nine months ended September 30, 2026 2025
Cash provided by operating activities $ 8,302 $ 7,065
Cash used in investing activities (3,456) (2,791)
Cash used in financing activities (3,908) (4,472)
Net change in cash, cash equivalents, and restricted cash $ 938 $ (198)
Operating activities
Cash provided by operating activities increased 18% in the first nine months of 2026 compared to the same period of 2025 driven by lower income taxes paid and higher net income.
Investing activities
Cash used in investing activities increased 24% in the first nine months of 2026 compared to the same period of 2025 driven by net purchases and maturities of short-term investments.
The table below details cash capital investments:
Millions, for the nine months ended September 30, 2026 2025
Rail and other track material $ 406 $ 395
Ties 453 447
Ballast 174 158
Other [a] 477 474
Total road infrastructure replacements 1,510 1,474
Line expansion and other capacity projects 212 184
Commercial facilities 142 251
Total capacity and commercial facilities 354 435
Locomotives and freight cars [b] 693 642
Technology and other 277 241
Total cash capital investments [c] $ 2,834 $ 2,792
[a]Other includes bridges and tunnels, signals, other road assets, and road work equipment.
[b]Locomotives and freight cars include early lease buyouts of $320 million in 2026 and $311 million in 2025.
[c]Weather-related damages for the nine months ended September 30, 2026 and 2025, are immaterial.
See Note 18 of the Condensed Consolidated Financial Statements, Item 1, for the pending acquisition of Norfolk Southern.
Capital plan
In 2026, we expect our capital plan to be approximately $3.5 billion. We plan to continue to make investments to support our growth strategy, improve the safety, resiliency, and operational efficiency of the network, harden our infrastructure, and replace older assets, including modernization of our locomotive fleet and acquiring freight cars to support replacement and growth opportunities. In addition, the plan includes investments in growth-related projects to drive more carloads to the network and enhance productivity through technology. This includes terminal investments supporting our manifest network and intermodal ramps to efficiently handle new and existing customers, along with siding investments (extensions and new), and second mainline track projects. The capital plan may be revised if business conditions warrant or if laws or regulations affect our ability to generate sufficient returns on these investments.
Financing activities
Cash used in financing activities decreased 13% in the first nine months of 2026 compared to the same period of 2025 driven by the pause of our share repurchases as part of the pending acquisition of Norfolk Southern, partially offset by a decrease in debt issued.
See Note 14 of the Condensed Consolidated Financial Statements, Item 1, for a description of our financing arrangements, Note 16 of the Condensed Consolidated Financial Statements, Item 1, for a description of our share repurchase programs, and Note 18 of the Condensed Consolidated Financial Statements, Item 1, for the pending acquisition of Norfolk Southern.
Free cash flow and cash flow conversion rate - Free cash flow is defined as cash provided by operating activities less cash used in investing activities and dividends paid. Cash flow conversion rate is defined as cash provided by operating activities less cash used for capital investments as a ratio of net income.
Free cash flow and cash flow conversion rate are considered non-GAAP financial measures by SEC Regulation G and Item 10(e) of SEC Regulation S-K and may not be defined and calculated by other companies in the same manner. We believe free cash flow and cash flow conversion rate are important to management and investors in evaluating our financial performance and measures our ability to generate cash without additional external financing. Free cash flow and cash flow conversion rate should be considered in addition to, rather than as a substitute for, cash provided by operating activities.
The following table reconciles cash provided by operating activities (GAAP measure) to free cash flow (non-GAAP measure):
Millions, for the nine months ended September 30, 2026 2025
Cash provided by operating activities $ 8,302 $ 7,065
Cash used in investing activities (3,456) (2,791)
Dividends paid (2,484) (2,418)
Free cash flow $ 2,362 $ 1,856
The following table reconciles cash provided by operating activities (GAAP measure) to cash flow conversion rate (non-GAAP measure):
Millions, except percentages, for the nine months ended September 30, 2026 2025
Cash provided by operating activities $ 8,302 $ 7,065
Cash used in capital investments (2,834) (2,792)
Total (a) $ 5,468 $ 4,273
Net income (b) $ 5,770 $ 5,290
Cash flow conversion rate (a/b) 95% 81%
Current liquidity status
We are continually evaluating our financial condition and liquidity. We analyze a wide range of economic scenarios and the impact on our ability to generate cash. These analyses inform our liquidity plans and activities outlined below and indicate we have sufficient borrowing capacity to sustain an extended period of lower volume.
During the nine months ended September 30, 2026, we generated $8.3 billion of cash provided by operating activities and paid our quarterly dividends. Our quarterly dividend increased from $1.38 per share to $1.42 per share in the third quarter of 2026. In the third quarter of 2025, we announced the pending acquisition of Norfolk Southern described in Note 18 of the Condensed Consolidated Financial Statements, Item 1, and paused our share repurchases. On September 30, 2026, we had $2.2 billion of cash and cash equivalents, $875 million of short-term investments, $2.0 billion of credit available under our revolving credit facility, and $600 million undrawn on the Receivables Facility. We have been, and we expect to continue to be, in compliance with our debt covenants.
We have contractual obligations that may affect our financial condition as described in the notes to the Condensed Consolidated Financial Statements and as referenced in the table below, as well as commitments related to the pending acquisition of Norfolk Southern, which are described in Note 18 of the Condensed Consolidated Financial Statements, Item 1, but not included in the table below. Based on our assessment of the underlying provisions and circumstances of our contractual obligations, other than the risks that we and other similarly situated companies face with respect to the condition of the capital markets, as of the date of this filing, there is no known trend, demand, commitment, event, or uncertainty that is reasonably likely to occur that would have a material adverse effect on our consolidated results of operations, financial condition, or liquidity. In addition, our commercial obligations, financings, and commitments described below are customary transactions that are like those of other comparable corporations, particularly within the transportation industry.
The following table identifies material contractual obligations as of September 30, 2026:
Oct. 1, through Dec. 31, 2026 Payments Due by Dec. 31,
Millions Total 2027 2028 2029 2030 After 2030
Debt [a] $ 56,889 $ 189 $ 2,455 $ 2,402 $ 2,360 $ 1,816 $ 47,667
Purchase obligations [b] 1,949 150 576 470 427 302 24
Operating leases [c] 879 52 224 191 130 109 173
Other post-retirement benefits [d] 328 9 36 36 36 36 175
Finance lease obligations [e] 74 2 37 14 21 - -
Total contractual obligations $ 60,119 $ 402 $ 3,328 $ 3,113 $ 2,974 $ 2,263 $ 48,039
[a]Excludes finance lease obligations of $68 million as well as unamortized discount and deferred issuance costs of ($1,648) million. Includes an interest component of $24,985 million.
[b]Purchase obligations include locomotive maintenance contracts; purchase commitments for ties, ballast, and rail; and agreements to purchase other goods and services.
[c]Includes leases for locomotives, freight cars, other equipment, and real estate. Includes an interest component of $91 million.
[d]Includes estimated other post-retirement, medical, and life insurance payments and payments made under the unfunded pension plan for the next ten years.
[e]Represents total obligations, including interest component of $6 million.
OTHER MATTERS
Asserted and unasserted claims - See Note 15 to the Condensed Consolidated Financial Statements, Item 1.
Indemnities - See Note 15 to the Condensed Consolidated Financial Statements, Item 1.
Pending Acquisition - See Note 18 to the Condensed Consolidated Financial Statements, Item 1, and the Agreement and Plan of Merger dated as of July 28, 2025, by and among UPC, Ruby Merger Sub 1 Corporation, Ruby Merger Sub 2 LLC, and Norfolk Southern, which is incorporated herein by reference to Exhibit 2.1 to the Corporation's Current Report on Form 8-K dated July 29, 2025.
CAUTIONARY INFORMATION
Certain statements in this report, and statements in other reports or information filed or to be filed with the SEC (as well as information included in oral statements or other written statements made or to be made by us), are, or will be, forward-looking statements as defined by the Securities Act of 1933 and the Securities Exchange Act of 1934. These forward-looking statements and information include, without limitation, statements and information set forth under the captions "Liquidity and Capital Resources" regarding our capital plan, share repurchase programs, contractual obligations, and "Other Matters" in this Item 2 of Part I. Forward-looking statements and information also include any other statements or information in this report (including information incorporated herein by reference) regarding: the merger agreement and the transactions contemplated therein (described in Note 18 to the Condensed Consolidated Financial Statements, Item 1), potential impacts of public health crises, including pandemics, epidemics, and the outbreak of other contagious disease, such as the coronavirus and its variant strains (COVID); wars, conflicts, and other geopolitical tensions in Ukraine, the Middle East, and elsewhere, and any impacts on our business operations, financial results, liquidity, and financial position, and on the world economy (including customers, employees, and supply chains), including as a result of fluctuations in volume and carloadings; closing of customer manufacturing, distribution, or production facilities; expectations as to operational or service improvements; expectations as to hiring challenges; availability of employees; expectations regarding the effectiveness of steps taken or to be taken to improve operations, service, infrastructure improvements, and transportation plan modifications (including those discussed in response to increased traffic); expectations as to cost savings, revenue growth, and earnings; the time by which goals, targets, aspirations, or objectives will be achieved; projections, predictions, expectations, estimates, or forecasts as to our business, financial, and operational results, future economic performance, and general economic conditions; proposed new products and services; estimates of costs relating to environmental remediation and restoration; estimates and expectations regarding tax matters; estimates and expectations regarding current or potential tariffs; expectations that claims, litigation, environmental costs, commitments, contingent liabilities, labor negotiations or agreements, cyber-attacks, or other matters will not have a material adverse effect on our consolidated results of operations, financial condition, or liquidity and any other similar expressions concerning matters that are not historical facts. Forward-looking statements may be identified by their use of forward-looking terminology, such as "believes," "expects," "may," "could," "should," "would," "will," "intends," "plans," "estimates," "anticipates," "projects," "pro forma," and similar words, phrases, expressions, or other comparable terminology.
Forward-looking statements should not be read as a guarantee of future performance, results, or outcomes, and will not necessarily be accurate indications of the times that, or by which, such performance, results, or outcomes will be achieved, if ever. Forward-looking statements and information are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in the statements and information. Forward-looking statements and information reflect the good faith consideration by management of currently available information, and may be based on underlying assumptions believed to be reasonable under the circumstances. However, such information and assumptions (and, therefore, such forward-looking statements and information) are or may be subject to variables or unknown or unforeseeable events or circumstances over which management has little or no influence or control, and many of these risks and uncertainties are currently amplified by and may continue to be amplified by, or in the future may be amplified by, among other things, macroeconomic and geopolitical conditions.
The Risk Factors in Item 1A of our 2025 Annual Report on Form 10-K, filed February 6, 2026, could affect our future results and could cause those results or other outcomes to differ materially from those expressed or implied in any forward-looking statements or information. To the extent circumstances require or we deem it otherwise necessary, we will update or amend these risk factors in a Form 10-Q, Form 8-K, or subsequent Form 10-K. All forward-looking statements are qualified by, and should be read in conjunction with, these Risk Factors.
Forward-looking statements speak only as of the date the statement was made. We assume no obligation to update forward looking information to reflect actual results, changes in assumptions, or changes in other factors affecting forward-looking information. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect thereto or with respect to other forward-looking statements.
AVAILABLE INFORMATION
Our Internet website is www.up.com. We make available free of charge on our website (under the "Investors" caption link) our Annual Reports on Form 10-K; our Quarterly Reports on Form 10-Q; our current reports on Form 8-K; our proxy statements; Forms 3, 4, and 5, filed on behalf of directors and certain executive officers; and amendments to such reports filed or furnished pursuant to the Securities Exchange Act of 1934, as amended (the Exchange Act). We provide these reports and statements as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. We also make available on our website previously filed SEC reports and exhibits via a link to EDGAR on the SEC's Internet site at www.sec.gov. We provide these previously filed reports as a convenience and their contents reflect only information that was true and correct as of the date of the report. We assume no obligation to update this historical information. Additionally, our corporate governance materials, including By-Laws, Board Committee charters, governance guidelines and policies, and codes of conduct and ethics for directors, officers, and employees are available on our website. From time to time, the corporate governance materials on our website may be updated as necessary to comply with rules issued by the SEC and the New York Stock Exchange or as desirable to promote the effective and efficient governance of our Company. Any security holder wishing to receive, without charge, a copy of any of our SEC filings or corporate governance materials should send a written request to: Secretary, Union Pacific Corporation, 1400 Douglas Street, Omaha, NE 68179.
References to our website address in this report, including references in Management's Discussion and Analysis of Financial Condition and Results of Operations, Item 2, are provided as a convenience and do not constitute, and should not be deemed, an incorporation by reference of the information contained on, or available through, the website. Therefore, such information should not be considered part of this report.
UP - Union Pacific Corporation published this content on October 22, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on October 22, 2026 at 19:46 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]