Key Stats
- Current Price: $269
- Q1 2026 Revenue: $6.2B, up 3% YoY
- Q1 2026 Adjusted EPS: $2.93, up 9% YoY
- Q1 2026 Reported EPS: $2.87, up 6% YoY
- Q1 2026 Operating Ratio (Adjusted): 59.9%, improved 80 bps YoY
- 2026 Guidance: Mid-single-digit reported EPS growth; operating ratio improvement
- Long-Term Guidance (through 2027): High single-digit to low double-digit EPS CAGR
- TIKR Model Price Target: $416.48
- Implied Upside: ~55% over ~5 years (around 10%/year annualized)
Union Pacific Stock Posts Record Q1 on Pricing Power and Productivity Gains
Union Pacific stock (UNP) delivered record first-quarter operating income and net income, with adjusted EPS of $2.93 rising 9% year over year on revenue of $6.2B that grew 3% despite a 1% decline in volume.
The bulk segment drove the strongest top-line contribution, with revenue up 10% on a 12% volume increase, according to EVP of Marketing and Sales Kenny Rocker on the Q1 2026 earnings call.
Record grain export demand to China and continued expansion into Mexico powered that bulk growth, with Bartlett’s new facility in Monterrey cited as a specific commercial win.
Industrial segment revenue rose 5% on 4% higher volume, also a first-quarter record, driven by construction activity tied to new LNG terminals and data centers alongside petrochemical business wins.
Premium segment revenue fell 5% on a 9% volume decline as international intermodal dropped 28% from West Coast import shifts and customer realignments, partially offset by three consecutive record quarters in domestic intermodal.
On operational execution, Union Pacific set first-quarter records across all six key performance metrics: freight car velocity improved 9% to 235 miles per day, terminal dwell reached 19.7 hours (11% better year over year), locomotive productivity rose 6%, and workforce productivity improved 7% with a 5% smaller workforce.
CFO Jennifer Hamann confirmed on the earnings call that quarterly pricing dollars exceeded inflation dollars for the period, with core pricing and business mix contributing 325 basis points to freight revenue improvement.
For 2026, management reaffirmed mid-single-digit reported EPS growth and operating ratio improvement, while noting that fuel costs will average over $4 per gallon in April versus the original $2.35 estimate, creating a second-quarter margin headwind.
Long-term, management reaffirmed a high single-digit to low double-digit EPS CAGR target through 2027, with CEO Jim Vena stating on the earnings call that the revised merger application with Norfolk Southern will be filed April 30 and that STB approval is expected by Q2 2027.
Union Pacific Stock Financials: Margin Expansion Resumes After 2023 Trough
Union Pacific stock has been executing a steady margin recovery since a 2023 operating income decline, and Q1 2026 continues that arc with the operating ratio improving to levels not seen in recent annual periods.
Total revenues were $24.5B on an LTM basis, modestly above the $24.3B reported for FY2024, reflecting a gradual revenue recovery from the $24.1B trough in FY2023.
Gross margin compressed from 58.5% in FY2021 to 53.5% in FY2023 before recovering to 56.4% on an LTM basis, tracking the pricing cycle and business mix shift away from higher-margin product categories.
Operating margin followed the same arc: 42.9% in FY2021, a trough of 37.9% in FY2023, recovering to 40.3% in FY2024 and 40.7% on an LTM basis.
For Q1 2026, operating income reached $2.5B, up 5% from $2.4B in Q1 2025, with EBIT margin expanding to 40.1% from 39.3% in the prior-year quarter.
EBITDA margin expanded 84 basis points year over year to 50.3% in Q1 2026, reflecting the combination of pricing discipline, workforce productivity gains, and record cycle time improvement, according to Hamann on the Q1 2026 earnings call.
The second-quarter operating ratio will face pressure from fuel costs averaging over $4 per gallon in April, but management expressed confidence on the earnings call that full-year OR improvement remains achievable through pricing and efficiency initiatives.
Valuation Model Take: UNP Stock Trades at a Discount, But the Merger Overhang Is Real
The TIKR model prices Union Pacific stock at $416.48, implying roughly 55% total upside from the current $269 price over the next 4.7 years, or about 9.8% annualized.
The mid-case model assumes 7.0% revenue CAGR and a 32.9% net income margin through 2035, both well above Union Pacific’s 1.1% one-year revenue growth rate but consistent with what a merger-driven acceleration and continued operational leverage could support.
This Q1 report strengthens the standalone investment case: the railroad is executing at record efficiency levels, pricing is outpacing inflation, and management has line of sight on full-year operating ratio improvement despite a meaningful fuel headwind.
The risk-reward picture is not purely operational, though. The Norfolk Southern merger timeline now targets Q2 2027 STB approval, meaning at least five more quarters of merger costs, suspended buybacks, and uncertainty around concession terms sit between current results and the upside the model captures.
Union Pacific stock is priced as though the merger creates more uncertainty than value. The operational record says otherwise.
The real question for Union Pacific stock is whether Q1 2026’s record operational results can hold through a fuel-pressured Q2 and an extended merger review, or whether execution slips while management attention is divided.
What Has to Go Right
- Fuel costs moderate from the April peak of over $4/gallon, relieving the Q2 OR headwind and allowing full-year operating ratio improvement to materialize as guided
- Domestic intermodal sustains its three-consecutive-record-quarter momentum as truck pricing tightens and over-the-road conversions accelerate through 2026
- The STB accepts the April 30 revised merger application without requesting additional material changes, keeping the Q2 2027 approval timeline intact
- Industrial segment volume continues to outperform on LNG terminal and data center construction demand, offsetting softness in housing-linked forest products and auto
What Could Still Go Wrong
- Average fuel at $4+ per gallon through Q2 compresses operating ratio improvement and forces a guidance walk-back on OR for the full year
- International intermodal, already down 28% in Q1, faces further pressure if West Coast import volumes remain subdued through 2026
- Merger concession negotiations with the STB expand beyond the handful of overlap customers identified, increasing the cost and timeline of the approval process
- The 9% EPS growth in Q1 reflects merger costs that inflate the adjusted/reported gap; if reported EPS growth trails mid-single digits, management credibility on guidance takes a hit
Should You Invest in Union Pacific Corporation?
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