Union Pacific Profit Rises as Fuel Spending Slides

Union Pacific Corporation (UNP), the largest railroad operator in North America, reported a significant increase in profits during the fourth quarter of 2024, driven by a substantial reduction in fuel expenses. The company's net income rose to $1.76 billion, or $2.91 per share, compared to $1.65 billion, or $2.71 per share, in the same period a year earlier. Analysts had expected earnings of $2.80 per share.



The Omaha, Neb.-based company's revenue for the quarter was $6.12 billion, down from $6.16 billion a year earlier. Analysts had expected sales of $6.15 billion. Despite the slight decline in revenue, Union Pacific's earnings were boosted by a 23% drop in fuel expenses, which amounted to $581 million. The average fuel price per gallon consumed also decreased by 24% to $2.41, contributing to the overall reduction in fuel costs.

Union Pacific's improved fuel efficiency, measured by consumption per gross ton miles, increased by 1% compared to the fourth quarter of 2023. Additionally, diesel prices across the U.S. were broadly lower during the fourth quarter compared to the year-ago period, according to the Energy Information Administration. These factors combined to create a substantial boost in profits for Union Pacific.

Looking ahead, Union Pacific expects volume in 2025 to be impacted by a mixed economic backdrop, but did not provide a specific revenue estimate. The company expects weak coal demand to continue driving down revenue, but noted that its uptick in grain volume will likely continue. Rising prices for natural gas could also be another win for the company, as utilities switch back to cheaper alternatives.

Union Pacific executives have mentioned that changes to economic policy, including possible tariffs and more lax regulation, may also impact the company's finances in 2025. While tariffs could potentially increase prices for consumers, more lax regulators could fast-track a plethora of waivers the company has submitted over the years, which have been held up in the regulatory process. By staying informed about these potential changes and adapting its strategies accordingly, Union Pacific can position itself to take advantage of new opportunities.

In conclusion, Union Pacific's focus on fuel efficiency and lower diesel prices has significantly contributed to its recent profit growth. As the railroad industry is heavily reliant on fuel, any improvements in fuel efficiency or reductions in fuel costs can have a significant impact on a company's bottom line. By continuing to invest in technologies and practices that enhance fuel efficiency, Union Pacific can maintain its competitive edge and ensure long-term profitability. Additionally, the company's strategic expansion of mainline and terminal capacities, along with its investment in advanced technologies, positions it to capitalize on growth opportunities in key regions like the Pacific Northwest and the Southwest.