Union Pacific: Fuel Cost Savings Drive Earnings Growth, Stock Surges

Union Pacific Corporation (UNP) shares surged Thursday after the company reported better-than-expected earnings for the fourth quarter, driven by a significant decline in fuel costs. The railroad giant's earnings per share (EPS) jumped 7% from a year ago to $2.91, surpassing analysts' expectations. Operating revenue fell 1% to $6.12 billion, slightly missing forecasts compiled by Visible Alpha.



Union Pacific's earnings growth can be attributed to a 23% drop in fuel expenses, which fell to $581 million, and a 24% decrease in the average fuel price per gallon consumed to $2.41. This was the fourth consecutive quarter of average fuel cost declines, contributing to the company's strong earnings performance. Additionally, Union Pacific saw improvements in freight car velocity and workforce productivity, which further bolstered its financial results.

Union Pacific's improved freight car velocity and workforce productivity are key factors driving the company's operational efficiency. In the fourth quarter of 2024, the company reported a 5% improvement in freight car velocity to 210 daily miles per car compared to the same period in 2023. This improvement can be attributed to the company's focus on enhancing its service and operational efficiency, as well as its investment in infrastructure improvements and transportation plan modifications to optimize its network and improve train handling.



Union Pacific's workforce productivity also saw a significant improvement, with a 12% increase to 1,102 car miles per employee in the fourth quarter of 2024 compared to the same period in 2023. This improvement reflects the company's commitment to investing in employee training and development, as well as its focus on operational efficiency and network improvements to address crew availability and operational inefficiencies.

Union Pacific's strong earnings performance and improved operational efficiency have positioned the company well for future growth. The railroad giant projects that its full-year EPS will be consistent with reaching its three-year compound annual growth rate (CAGR) in the range of a high-single-digit to low-double-digit percent. However, the company warns that volumes could be impacted by mixed economic conditions, fluctuating coal demand, and challenging year-over-year international intermodal comparisons.



In conclusion, Union Pacific's earnings growth, driven by falling fuel costs and improved operational efficiency, has led to a surge in the company's stock price. The railroad giant's focus on enhancing service and operational efficiency, investing in infrastructure improvements, and maintaining a strong balance sheet has positioned it well for future growth. As the company continues to navigate the volatile nature of fuel prices and the broader macroeconomic environment, investors can expect Union Pacific to remain a strong performer in the railroad industry.