10-K: Union Pacific Reports Strong 2024 Results, Driven by Safety, Service, and Operational Excellence

Union Pacific's 2024 performance showcases a commitment to safety, service, and operational excellence, leading to a 6% increase in earnings per diluted share to $11.09 and a 240-basis point improvement in operating ratio to 59.9%.

Summary

• Union Pacific reported a successful 2024, driven by its strategy of Safety, Service, and Operational Excellence.
• Earnings per diluted share increased by 6% to $11.09 compared to 2023.
• Total volumes increased by 3% versus 2023, with strength in international intermodal and agricultural products offsetting a 20% decline in coal.
• The operating ratio improved by 240 basis points to 59.9%, driven by efficiency improvements.
• The company invested $3.4 billion in capital projects to improve infrastructure and service.
• Operating Revenues grew 1% driven by volume gains and strong core pricing, which more than offset lower fuel surcharge revenues and an unfavorable business mix.
• Freight revenues grew 4% when removing the impact of fuel.
• The company's workforce includes five generations from Traditionalists (born before 1946) to Generation Z (born after 1998).
• As of December 31, 2024, the Company employed 32,439 employees.
• The average age is 46.9 with an average tenure of 16.2 years.
• Local negotiations began on January 1, 2025, related to years 2025-2029.
• The 2024 personal injury rate improved 23%, and the derailment incident rate improved 20% versus 2023.
• The median annual compensation for all employees employed as of December 31, 2024, was $103,190 (excluding the CEO).
• The company expects its 2025 capital plan to be approximately $3.4 billion, consistent with 2024.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with strong financial results and improvements in key operational metrics. While acknowledging some challenges, the overall tone is optimistic and confident in the company's future performance.

Positives

• Significant reductions in personal injury and derailment rates due to investments in training, safety programs, infrastructure, and technology.
• Improved service performance with freight car velocity up 2% and terminal dwell improved 3% from 2023.
• Strong productivity improvements in workforce and locomotive utilization.
• Growth in operating revenues driven by volume gains and core pricing.
• The company is committed to continuously finding new ways to enhance safety.
• The company is committed to delivering the service it sold to its customers.
• The company will continue to transform its railroad using technology and automation to further improve its service product, improve resource utilization, and lower its overall cost structure.

Negatives

• A 20% decline in coal volume due to competitive energy dynamics and reduced coal-fired electricity production.
• Lower fuel surcharge revenues due to decreased fuel prices.
• Macroeconomic uncertainties remain in 2025 that could have a material impact on the 2025 financial and operating results.
• Lower coal demand, resulting from ongoing competitive energy dynamics and reduced coal-fired electricity production, and lower international intermodal business, due to the west coast volume surge in 2024, are expected to negatively impact volumes.

Risks

• Macroeconomic uncertainties could impact 2025 financial and operating results.
• Fluctuations in fuel prices can affect operating results.
• Climate change and market/regulatory responses to climate change could have a material adverse effect on results of operations, financial condition, and liquidity.
• Pandemics or other public health crises could adversely affect the business, financial condition, and results of operations.
• Cybersecurity threats could have a material adverse impact on results of operations, financial condition, and liquidity.
• Severe weather conditions and other natural phenomena could cause line outages and other interruptions to infrastructure.

Future Outlook

The team is focused on what's possible and unlocking the value of the Union Pacific franchise in 2025, building on the accomplishments to achieve a higher level of success.

Management Comments

• The Union Pacific team had a very successful 2024, as we executed our strategy of Safety, Service, and Operational Excellence leading to Growth.
• We are ready to build on these accomplishments to achieve a higher level of success.
• We understand that we're the current stewards of this amazing, historic company, and it's our responsibility to leave it in a better place than we found it, as those before us had done.

Industry Context

The report highlights Union Pacific's position as a critical link in the global supply chain, connecting 23 states in the western two-thirds of the country by rail and serving many of the fastest-growing U.S. population centers.

Comparison to Industry Standards

• The document compares Union Pacific's cumulative total shareholder returns to a peer group index (CSX Corporation and Norfolk Southern Corporation), the Dow Jones Transportation Index (DJ Trans), and the Standard & Poor's 500 Stock Index (S&P 500).
• For the 1 Year (2024) period, UNP had a return of (5.1 %) compared to the Peer Group (2.4 %), DJ Trans 1.5 %, and S&P 500 25.0 %.
• For the 3 Year (2022 2024) period, UNP had a return of (3.1 %) compared to the Peer Group (13.0 %), DJ Trans 0.6 %, and S&P 500 29.2 %.

Legal Proceedings

• The company is involved in antitrust litigation related to alleged price-fixing by establishing common fuel surcharges for certain rail traffic, but believes the lawsuits are without merit.

Related Party Transactions

• UPRR has a 37.03% economic interest in TTX Company (TTX).
• TTX car hire expense of $432 million in 2024, $399 million in 2023, and $402 million in 2022 are included in equipment and other rents in our Consolidated Statements of Income.

Stakeholder Impact

• The company aims to deliver value to its roughly 10,000 customers by delivering products in a safe, reliable, fuel-efficient, and environmentally responsible manner.
• The company is focused on attracting, retaining, and developing talent across its entire system.
• The company is committed to cultivating a safety-focused culture, so its employees return home safely every day.

Next Steps

• Continue to focus on the four pillars of safety.
• Continue to meet with customers to agree on their specific needs and outcomes.
• Continue to transform the railroad using technology and automation.

Key Dates

Keywords

Union Pacific, railroad, financial results, operating ratio, volumes, safety, service, operational excellence, capital investment, freight revenues, locomotive productivity, workforce productivity, intermodal, coal, grain, rail