Union Pacific's Q2 2026 revenue rose 12% to $6.86B and EPS 7% to $3.36, but 4% ex-fuel-surcharge growth and a fuel-driven 0.7-pt operating ratio slip to 59.7% tell the real story; 2026 EPS guidance raised to high-single digit.
Revenue
$6.9B
+11.5% YoY
Net income
$2.0B
+6.2% YoY
Diluted EPS
$3.36
+6.7% YoY
Operating margin
40.3%
How UNP compares with Industrials peers
Figure
UNP
Peer median
Rank
Revenue growth (YoY)
+11.5%
+8.5%
25th of 79
Operating margin
40.3%
17.9%
3rd of 78
EPS growth (YoY)
+6.7%
+13.4%
52nd of 77
Rank 1 = fastest revenue growth, highest operating margin, fastest EPS growth. Peers are the other Industrials companies with a 2026 report on this site, each at its latest period we've analyzed; fiscal calendars differ, so periods are not always the same months.
Union Pacific, the largest railroad in the western US, earned $1.99 billion ($3.36 per diluted share) in the second quarter of 2026, up 6% and 7%, on operating revenue of $6.86 billion, up 12%. Most of that revenue jump was diesel prices passing through to customers. Fuel surcharges (extra charges that track the price of diesel) rose from $569 million to about $1.0 billion, and freight revenue excluding those surcharges grew only 4%. Underneath, the railroad carried 2% more loads, raised prices, and kept running more efficiently. Expensive fuel is also why its main efficiency measure, the operating ratio, got slightly worse on paper, from 59.0% to 59.7%.
At a glance
12% revenue growth, but 4% without fuel surcharges. Diesel averaged $3.86 a gallon versus $2.42 a year ago (+60%), and those costs are billed back to shippers. The underlying business grew about a third as fast as the headline.
Operating ratio 59.7%, 0.7 points worse. Management says higher fuel prices alone added 1.2 points. Without that effect the railroad got a little more efficient, not less.
Management raised its 2026 guidance for reported EPS growth to "high-single digit." In April it said "mid-single digit." First-half diluted EPS is up 6% ($6.22 vs $5.85), so the second half has to grow faster to hit the new target.
The quarter in numbers
The operating ratio is the standard railroad efficiency measure: operating expenses as a share of revenue. A 59.7% ratio means that for every $1 of revenue, 59.7 cents went to running the railroad (crews, fuel, maintenance, depreciation) and 40.3 cents was left as operating profit. Lower is better.
Metric
Q2 2026
Q2 2025
YoY Change
Operating revenue
$6,864M
$6,154M
+11.5%
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Premium grew fastest. The 10-Q says domestic intermodal carloads (containers and trailers moved between US cities) rose 19%, while international intermodal (import/export containers) fell 14%. Intermodal revenue rose 26% to $1.39 billion, and revenue per intermodal unit rose 21% to $1,626, mostly from fuel surcharges. Automotive revenue rose 11% on flat carloads.
Bulk revenue rose 7% even though carloads fell 1%. Grain revenue rose 15% on 12% more carloads, driven by export grain. Coal carloads fell 14%, which the filing attributes to "lower natural gas prices, milder weather, and mine maintenance and outages." Coal pays relatively little per car, so losing coal carloads actually raised the group's average revenue per car.
Industrial carloads rose 3%. The filing cites demand for industrial chemicals and plastics and construction-project materials, partly offset by lower soda ash exports. Metals & minerals revenue rose 11%.
Mexico cross-border revenue rose 10% to $828 million on 5% more volume.
Mix here means the blend of freight that was shipped. It was a slight drag on revenue this quarter. Domestic intermodal, the fastest-growing piece, earns far less per load than a carload of chemicals or grain, so growth there pulls the average down even when the extra loads are profitable.
Why costs rose 13%
Total operating expenses rose $472 million to $4.10 billion. The breakdown shows where that came from:
Fuel: +$362 million (+63%). This accounts for about three-quarters of the cost increase. Fuel used per unit of work improved 1% (1.051 gallons per thousand gross ton-miles), but that did little against a 60% higher price per gallon. The 10-Q blames the price rise on "supply chain pressures."
Compensation and benefits: -$9 million (-1%). Average headcount fell 3% to 28,786 while the railroad moved more freight. Workforce productivity (car miles per employee) rose 5%. Last year's quarter also included a $55 million one-time charge for ratifying a crew staffing agreement.
Purchased services and materials: +$67 million (+10%). $32 million of this was merger-related, plus inflation and volume-related intermodal costs.
Other: +$43 million (+13%). The filing cites higher costs from damaged freight and equipment, plus environmental costs and property taxes.
Equipment rents: -$16 million (-7%). Cars came back faster (freight car velocity up 5% to 231 miles a day, terminal dwell down 7% to 19.7 hours), so the railroad paid less rent on cars owned by others.
Takeaway: Fuel is distorting both headline numbers at once. It inflates revenue growth to 12% and makes the operating ratio look 1.2 points worse. In dollars, surcharges rose by roughly $430-480 million, which more than covered the $362 million increase in fuel expense, so fuel was not a profit drag. It pushes the ratio up only because the same dollars are added to both revenue and cost. Strip fuel out and Q2 is a 4% top-line quarter. The adjusted operating ratio was roughly flat (about 0.1 points better), and the gain came from price and 2% more volume while headcount fell 3%.
What the headline numbers hide
The adjusted EPS comparison is flattered by taxes. Adjusted EPS growth of 13% (to $3.41 from $3.03) looks twice as strong as reported growth of 7%. The main reason is the prior-year baseline. Union Pacific's adjusted Q2 2025 figure removed a $115 million deferred-tax benefit from a Kansas tax law change ($0.19 a share), which lowered the base. This year's quarter also had a smaller one-time tax gain: a $27 million cut in deferred tax expense from "changes in state tax laws and other state tax matters." That gain was not adjusted out. The only item excluded this year was $35 million of merger costs ($0.05 a share). If the $27 million is treated the same way as last year's Kansas item, adjusted EPS growth comes out closer to 11% than 13%.
None of the EPS growth came from buybacks. Diluted shares were 594.0 million versus 594.8 million, essentially flat. Union Pacific paused repurchases when it agreed to buy Norfolk Southern in 2025 and spent only $26 million on buybacks in the first half, versus $2.68 billion a year earlier. Interest expense fell $22 million as debt came down, a small help. Other income fell $18 million on lower real estate income. The effective tax rate rose from 18.9% to 22.0%, a headwind because of last year's Kansas benefit. So the 7% EPS growth is essentially operating income growth (+9%) minus a higher tax rate.
Cash conversion is strong but helped by timing. Operating cash flow for the first half was $5.52 billion, 1.5x net income of $3.69 billion, and up 21%. The 10-Q attributes the increase to "lower income taxes paid and higher net income," so part of it is timing rather than a lasting improvement. Free cash flow after capital spending and dividends (the company's own definition) nearly doubled to $1.81 billion from $1.11 billion. That cash went mostly to paying down debt, which fell from $31.8 billion to $30.3 billion since December.
Receivables grew faster than sales. Accounts receivable rose to $2.13 billion from $1.86 billion at year-end (+15%). Revenue rising with fuel surcharges explains much of this, but it is worth watching.
Service slipped slightly as volume grew. The intermodal service performance index fell 4 points to 95% and the manifest (mixed carload) index fell 2 points. The company says this reflects comparison against a higher benchmark. Train speed and dwell both improved.
Merger status
Union Pacific agreed in July 2025 to acquire Norfolk Southern, and both companies' shareholders approved the deal in November 2025. The remaining step is approval from the Surface Transportation Board (STB), the federal railroad regulator. According to the 10-Q:
The STB rejected the first application as incomplete in January 2026.
A revised application filed April 30 was accepted as complete effective May 28, 2026. The STB is holding the proceeding in abeyance (paused) until supplemental information, due July 27, 2026, is filed.
Q2 merger costs were $35 million ($71 million year to date). Either company could owe the other a $2.5 billion termination fee in certain circumstances. For shareholders, the most concrete effect for now is that buybacks remain on hold.
Outlook
Management's updated 2026 outlook:
Reported EPS growth: "high-single digit," raised from "mid-single digit" in April.
Pricing gains above cost inflation, in dollars.
Operating ratio improvement for the year.
Capital spending of $3.3 billion.
Continued annual dividend increases. The quarterly dividend is $1.38, up 3%.
The release describes the economic backdrop as "mixed," an upgrade from "muted" in April.
Our read: The guidance raise looks achievable but depends on volume. First-half reported EPS grew 6%. By our rough math from the company's 2025 net income, the second half needs about 9-10% growth for the full year to reach "high-single digit." The pieces that are working are pricing, the 3-4% fall in headcount, and faster car cycles. The pieces that can't be controlled are coal, which depends on natural gas prices, and international intermodal, which depends on trade flows. Both were down double digits this quarter. The full-year target of an improved operating ratio also depends on diesel: at Q2's fuel prices, the reported ratio is running worse than last year (60.1% year to date vs 59.8%). In Q3, watch whether domestic intermodal growth keeps offsetting coal, whether fuel stays near $3.86, and whether the STB restarts the merger review once the supplemental filing is in.