Union Pacific Corporation (NYSE:UNP) Q3 2025 Earnings Call Transcript

Union Pacific Corporation (NYSE:UNP) Q3 2025 Earnings Call Transcript October 23, 2025

Union Pacific Corporation beats earnings expectations. Reported EPS is $3.08, expectations were $2.99.

Operator: Greetings, and welcome to the Union Pacific’s Third Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded, and the slides for today’s presentation are available on Union Pacific’s website. At this time, it is now my pleasure to introduce your host, Mr. Jim Vena, Chief Executive Officer for Union Pacific. Thank you, Mr. Vena. You may now begin your presentation.

Vincenzo Vena: Thank you very much, Rob. Listen, thanks, everyone, for joining us. Beautiful 36-degree day here in morning in Omaha, Nebraska, absolutely perfect day to be railroading this type of [ data ] that I love, not too hot, not too cold. It’s just [ a slam dogs ] so Eric and team should continue to deliver what they’ve delivered this past quarter, and we’ll get into that in a minute. So here with me, we’re going to review the third quarter 2025 numbers. Here with me is Jennifer, our Chief Financial Officer; Eric, our Operations Chief; Marketing Sales Chief, Kenny Rocker. As you’ll hear from the team this morning, our third quarter results serve as a proof point that we are successfully executing on our strategy. We are focused on driving continued improvements in our pursuit of what’s possible.

Now let’s dig into our results on Slide 4. Union Pacific reported 2025 third quarter earnings per share of $3.01, excluding $41 million of merger-related costs, our adjusted earnings per share of $3.08 increased 12% versus last year. Core pricing gains and continued operational efficiencies drove the strong financial results in the quarter. Freight revenue excluding fuel, grew for the sixth consecutive quarter and set a best-ever record. In addition, we set best-ever quarterly records in workforce productivity, fuel consumption, terminal dwell and train line. As a result, our third quarter adjusted operating ratio was 58.5%, a 180 basis point improvement versus last year. Importantly, our safety and service results also improved, demonstrating the team’s commitment to our goal of running the safest and most reliable railroad in North America.

Next, the team will walk through the third quarter in more detail, and then I’ll come back and wrap it up before we go to Q&A. And with that, Jennifer Hamann, you are up.

Jennifer Hamann: Thank you, Jim, and good morning, everyone. I’ll begin with a walk down of our third quarter income statement on Slide 6, where our operating revenue of $6.2 billion increased 3% versus last year. Digging into the top line further, freight revenue totaled $5.9 billion, up 3%. Volume was down slightly in the quarter, driving a 25 basis points reduction in freight revenue. Fuel was also a modest headwind with surcharge revenue of $602 million, down $33 million as lower fuel prices impacted freight revenue 50 basis points. Strong core pricing, combined with a more favorable business mix to drive a 350 basis point improvement in freight revenue versus 2024. Importantly, our ability to yield pricing dollars net of inflation that are accretive to our operating ratio is directly supported by a consistent and reliable service product.

Wrapping up the top line, other revenue declined 2% to $317 million. Lower revenue from the transfer of Metro operations was partially offset by a favorable comparison to a onetime contract settlement of $12 million in 2024. Switching to expenses, our appendix slides provide more detail, but I’ll walk through the highlights as operating expense increased only 1% to $3.7 billion. Compensation and benefits decreased 1% as 4% lower workforce levels and record productivity more than offset the impact of wage inflation. Compensation per employee increased 2.5% versus last year, and we expect full year compensation per employee and up around 3%, which is consistent with the increase we’ve seen year-to-date. Fuel expense grew 1% driven by a 3% increase in gross ton-miles, partially offset by a 2% decrease in fuel prices from $2.60 to $2.56 per gallon and a 1% improvement in the consumption rate.

In fact, our fuel consumption rate set a best ever record in the quarter as we yielded benefits from our fuel initiatives. Purchased services and materials expense increased 6% due to merger-related costs and equipment and other rents declined 11%, driven by favorable contract settlements of $13 million, improved cycle times and lower [ fleet ] costs were partially offset by higher state and local taxes. Reported operating income grew 6% to $2.5 billion. Below the line, other income grew 10% to $96 million on real estate gains. Our reported net income totaled $1.8 billion with earnings per share of $3.01. When you exclude the $41 million of merger costs in the quarter, our adjusted earnings per share totaled $3.08 and our adjusted operating ratio came in at 58.5%.

Overall, really great quarterly financial results enabled by successfully executing on our strategic priorities. Turning to cash generation and the balance sheet on Slide 7. Third quarter cash from operations totaled $7.1 billion, up 6% or $381 million versus last year. As we discussed when we announced our merger with the Norfolk Southern, we have paused our share repurchase program. We are prioritizing the reduction of debt and paid down $1 billion in long-term notes during the third quarter. With that, our adjusted debt-to-EBITDA ratio finished the quarter lower at 2.6x. Our cash balance ended at just over $800 million after funding our capital program and paying the increased third quarter dividend, our 19th consecutive year of providing our shareholders with an annual dividend raise.

As we close out 2025, we expect our cash balance to steadily grow with our strong cash generation. Looking now to the remainder of the year on Slide 8. With just over 2 months left in the year, we are proud of how we have executed on our strategy this year. We’ve handled volume growth while improving our service and efficiency. Notably, the third quarter continued this trend as we handled the highest absolute volumes of the year while setting several best ever operating records. Meanwhile, some of the key economic indicators like automotive sales and housing starts, are generally softer than when we established our Investor Day targets last September. Against that backdrop, we have achieved very solid results with reported year-to-date EPS growth of 8% and 80 basis points of operating ratio improvement.

For the fourth quarter, volumes are currently running down 6% as international intermodal volumes reflect the tough comparison against last year’s strong growth. This level of decline plus merger cost and pause share repurchases obviously creates a headwind to earnings and margin expansion compared to last year’s record fourth quarter. The team understands the task and is working hard to drive more volume to the railroad in a safe, efficient manner. Despite the somewhat challenging close to the year, we still expect to achieve our 3-year EPS CAGR view of high single to low double-digit growth. We also are reaffirming our view on accretive pricing, industry-leading operating ratio and return on invested capital. It is an exciting time at Union Pacific as we execute on our strategy and deliver for our customers in a way that I have not seen us do in [indiscernible]

Kenny Rocker: As Jim mentioned, set a best ever quarterly record. Eric and the operating team continue to deliver excellent service, enabling our commercial team to lead with confidence and deliver strong pricing results. Let’s jump right in and talk about the key drivers for each of these business groups. Starting with our bulk segment. Revenue for the quarter was up 7% compared to last year on a 7% increase in volume. Strong core pricing gains were partially offset by lower fuel surcharges and business mix. Strength in coal was driven by strong customer demand due to favorable natural gas pricing and the continuation of Lower Colorado River Authority shipment, which started in April. Lower domestic grain demand was more than offset by strength in export lead shipment and business development in Mexico along with increased volumes from new grain products facilities.

Lastly, increased [ potash ] shipments drove favorable year-over-year volumes in the fertilizer market. Turning to Industrial. Revenue was up [ 3% ] for the quarter on a 3% increase in volume and a 1% increase in average revenue per carload. Strong core pricing gains were partially offset by business mix and lower fuel surcharges. Demand and business wins increase petrochemicals, construction and metal shipments. However, these gains were partially offset by decreased volume in our energy and specialized markets. Premium revenue for the quarter declined 2% on a 5% decrease in volume and a 3% increase in average revenue per car, reflecting business mix and lower fuel surcharges. Overall, intermodal volumes were challenged by [ Lower of West Coast ] imports, resulted in a 17% decrease in international volumes.

However, our domestic segment delivered record-breaking volumes this quarter, driven by exceptional service and business lines, reduced autoparts production and OEM quality hold contributed to lower automotive volume. Turning to Slide 11. We expect continued strength in some of our bulk and industrial segments, which is encouraging. However, we will be — it will be outweighed by lower — international volumes and tough comparisons. The commercial team’s strong focus of first 9 months of the — year-over-year challenges with soybean exports. Moving to Industrial. We’re positioned to finish strong in our petrochemicals market. That’s driven by the investments we’ve made in our Gulf Coast franchise and the strength of our service product, which continues to help us win with new customers.

In fact, we recently won new petrochemical business that began earlier this month. It’s a meaningful addition that reinforces our competitive position in the region. We also anticipate solid performance in the metals and minerals markets, where our team is laser focused on business development to outperform the market. On the other hand, our energy and specialized markets are expected to remain challenged, primarily driven by fewer petroleum shipments as we continue to balance volume at the right margin — is expected to continue facing challenges driven by reduced auto parts production and OEM quality holds. As we look ahead, our strategy is clear and our confidence is grounded in our outstanding service performance whether it’s powering growth in bulk, driving wins in industrial or unlocking new opportunities in premium, execution is what set Union Pacific apart.

Together, we are building a stronger, faster and more competitive railroad, and we’re just getting started. And with that, I’ll turn it over to Eric.

Eric Gehringer: Thank you, Kenny, and good morning. Starting on Slide 13, where our results do an excellent job, demonstrating the team’s unwavering focus on our strategy to lead the industry in safety, service and operational excellence. Our vision is clear. And fundamentally, the railroad is operating exceptionally well, showcasing robust fluidity, consistency and reliability. Most importantly, we are achieving these results safely. Our safety-first mindset is delivering measurable progress as both personal injury and derailment rates continue to improve versus our 3-year rolling average. Rail is the safest land-based freight transportation method, and we will continue doing our part to make it even safer through ongoing investments in our network, employees, technology and communities.

Freight car velocity, the best measure of fluidity on the railroad improved 8% to 226 miles per day, a third quarter record. Further, September marked our best ever. Let me repeat that, our best ever monthly performance at over 230 miles per day. Driving the performance was a record terminal dwell of just over 20 hours, increased train speed and the continued reduction of daily car touches across our network. These improvements are not only driving strong productivity gains within our operations, but also delivering significant efficiencies to our customers, reducing equipment cost and accelerating the delivery of their products to market. On the service front, both intermodal and manifest service performance improved year-over-year to 98% and 100%, respectively.

These strong results reinforce our strategic approach and underscore the importance of maintaining a proactive buffer of resources. As Kenny and his team bring business to the railroad, we aren’t waiting weeks to react. We have the locomotives, crews and freight cars prepositioned and ready to provide the high quality of service we sold to our customers. Now let’s review our key efficiency metrics on Slide 14. As noted earlier, strong network fluidity is continuing to drive productivity across our railroad, and that’s evidenced by the results on this slide. Locomotive productivity improved 4% versus last year, reflecting the continued benefits associated with our efforts to reduce locomotive dwell time. Last quarter, our team set a goal to reduce locomotive dwell below 15 hours.

And this quarter, we delivered, achieving a record 14.9 hours. This underscores our dedication to maximizing asset efficiency. Workforce productivity — which includes all employees, improved 6% and marked an all-time quarterly record. Our active train engine and yard workforce decreased 4% against flat volumes versus last year. We remain focused on effectively leveraging technology to optimize our workforce, while also recognizing the importance of balancing our resources as we plan for the future. Train length in the quarter grew 2% versus last year to just over 9,800 feet, an all-time quarterly record, a remarkable accomplishment when you consider the mix headwinds associated with softer international intermodal shipments which were down 17% year-over-year.

We will continue adapting our transportation plan as we harness technology and infrastructure investments to safely generate mainline capacity for future growth. Wrapping up. Operationally, the team continues to raise the bar, delivering exceptional results quarter after quarter. It’s the perpetual dissatisfaction that I’ve spoken about before. That’s our mindset. It’s imperative we continue driving efficiency while demonstrating consistent and reliable service. This enables Kenny and his team to be more competitive in the marketplace with a new long-term business. While we do have a historic opportunity ahead, the focus remains on today, further optimizing the best rail franchise in North America, I’m confident we’ll continue improving in the pursuit of industry-leading safety, service and operational excellence.

Jim?

Vincenzo Vena: Eric, Jennifer, Kenny, thank you very much. Okay. I think you did a great job. But why don’t we just turn to Slide 16, I’d just like to wrap it up before we get the questions. So first, as you heard from Jennifer, we are executing our strategy of driving strong financial results. In the third quarter, we handled the highest absolute volumes of the year while setting several best ever quarterly operating records. Kenny highlighted how the team is focused on outperforming our markets while pricing to the value we’re providing our customers. Eric and team have the network operating extremely well as evidenced by our record operating results. Over the past several quarters, we’ve demonstrated agility with our buffer of resources.

We will continue driving efficiencies while providing consistent and reliable service to win with our customers. To wrap it up, we are confident in our ability to lead the industry in safety, service and operational excellence. In the upcoming weeks, we will hold our special meeting and shareholder vote. We’ll also be filing our merger application with the STB. At that time, we will provide more details on the opportunity with the Norfolk Southern to create America’s first transcontinental railroad. Our results today demonstrate we are focused on the day-to-day business of optimizing the great Union Pacific franchise. And with that, we’re ready to take your questions. Rob?

Operator: Thank you, Mr. Vena. We’ll now be conducting a question-and-answer session. [Operator Instructions] Our first question is from the line of Tom Wadewitz with UBS.

Q&A Session

Thomas Wadewitz: I wanted to see if you could offer some more thoughts on just how you see the merger application, the process of building support from shippers [ from unions ]. Just how that process is progressing? I think the deal you had with Smart, the agreement was a nice win for you. I don’t know if you expect any more of those coming or if you expect kind of any gains on the shipper side? Or is it more like we’re in a waiting period for the filing? And then I don’t know, you said a couple of weeks for the filing, any more kind of just expectation of when that filing will come with STB.

Vincenzo Vena: Well, Tom, listen, you’re a smart guy. I think you covered just about everything to do with the merger and 1 question. We could be up here for 15 minutes. But let me — let’s just quickly summarize where we are. When we started at Union Pacific looking at whether what we do next and what the future looks like, we needed to make sure there were certain things fundamentally that where Union Pacific was as a railroad and how our business was. And we needed to have a service level that was high enough that customers could see what we could do and that they were assured that when we merged, we would be able to provide a real high level of service. And the entire team, and I give Eric as the leader and everybody from the operating department at Union Pacific, and it takes more than that.

It takes fundamentally spending the right money, making the right decision. So it truly is a company we are delivering at the levels of service close to 100%, okay? You can never get to 100%. You’re always going to have some problems, but close to 100%. So we have that as a foundation, Tom. On top of that, we wanted to make sure financially, we have a company that’s in a good place. And you could see Jennifer say we paid back $1 billion of debt in the third quarter, so — and we’re down to a [ 2.6 multiple ], which is great, and we’ll continue to use the cash or store it instead of buying back shares. So when you put the foundation of who we are and on safety, our — we don’t like to talk about it on a time and place number, but I’m going to give you a number.

We’re down into the — like the [ 0.6 ] something between [ 0.6 and 0.7 ] this year, which is industry-leading at this point and the best safety numbers for people that come to work and go home. So we needed to have a safer railroad. Our accident numbers have dropped substantially. We need it to be financially in a good place, and then we needed to move ahead. And I think what you’ve seen from the people that truly understand railroading, they understand the value of what we’re proposing. And the value is we look at it not only on what the STB tells us we have to do and what we have to present, okay, the rules that were set up 20-some years ago. But we feel, is it better for our customers. And absolutely, for the majority of our customers, it is going to improve with the speed and how many assets they’re going to have to have and how fast we can move anytime anybody that crosses that today hands off.

And remember, we hand off a huge percentage of our originations to somebody else to go do the final mile or vice versa. So it’s good for our customers. And our customers understand that we are competing against the world, Tom. This is not just we compete against Canadian ports. There is going to be 5 or 6 or 7 trains that come across Canada that should be, and we think they should be handled by U.S. ports, but instead, they’re handled the Canadian ports by Canadian railroaders across the country to drop into the U.S. And if we can become more efficient even than where we are today and more fluid and be able to have a different product, we can move some of that traffic. So we have more American jobs and more people working for Union Pacific, the combined company.

So when I look at everything, what we’ve done is we’ve guaranteed jobs for every unionized employee on the day that we — that the merger closes. And why would we do that? We are absolutely sure we can grow the business because of the watershed area of the United States that’s underserved and a railroad that is seamless. Listen, I’ll quote one of the other CEOs when they went through their merger. And I’ll give you the quote off the top of my head, but I could easily pull it up on my phone because it’s one of my favorite ones to read whenever I see somebody write from another railroad how it’s not real good for us and they’re worried. It was — even though [ UP ] has a great franchise coming out of Chicago, and it’s a great way to get the Mexico, nobody can beat and compete, and they’re going to have to compete hard to win with our single line where we don’t have to hand off to somebody else.

So Tom, when you frame that, the SMART-TD agreement, it would just formalized what we had in place that we had already guaranteed. And we’re in discussion with other unions to formalize it and I’m more than willing to formalize it. So it’s not just my word and it’s not just my — what we’ve been saying, we’re willing to put it on paper and say what we’re going to do with our unionized employees. And we’ll work through that. And in fact, Tom, we took this round of negotiations that we wanted to negotiate directly with our unions because our employees are really important to us, and we wanted to make sure that we were doing the right thing, so it’s a win-win for our employees and ourselves. And I can tell you, right now, we have an agreement, either in principle, not yet out for ratification or sorry, they’re going to go up for ratification with every union.

So basically, we have finished this round of negotiations, and we have — because the unions understand how beneficial overall this deal is and how it’s going to help us move ahead. So we’re real happy with where we are. So Tom, listen, unless I missed something and you wanted me to cut in — you talked about the timing. So what I can tell you about the timing is it sure will not take us into January to get this done, okay? We’re into getting the deal done as soon as possible. If you ask Jim Vena, I want it in, okay, before the 1st of December, the application. If you talk to some people on the team, they’re saying, Jim Vena, would you give us a little bit of time? And the answer is no. So I’m hoping that we can do everything we can to have it in by the end of November or the latest in early December so that we can have the application in and get that process moving.

So Tom, hopefully, I answered everything there. Sorry for the long answer.

Thomas Wadewitz: No, on the shipper side, anything new there? Or is that — that’s the only thing you didn’t hit. And thanks for all the perspective.

Vincenzo Vena: Yes. Listen, Kenny, why don’t you say where we are with the customers and how many letters of support we have already?

Kenny Rocker: Yes. I just want to reaffirm something you said, Jim, about 40% of our business either comes into or moved out of Union Pacific that we’re competing globally. But absolutely, I mean, we have over 1,200 stakeholders. Those are ports, government officials, they’re short lines. But if you just look at the customers, we’ve got over 400 customers that have sent in a letter of support and there’s still a pipeline behind that. And they run the gamut, they represent all the industries that we serve.

Vincenzo Vena: Okay. Tom, thank you very much.

Operator: The next question is from the line of Ken Hoexter with Bank of America.

Ken Hoexter: So Jen, you talked a little bit about sequential OR or I guess, fourth quarter, you threw out some initial thoughts there. Can you talk to the puts and takes? You mentioned the favorable equipment settlements, the lower mix impact, your revenue thoughts. So maybe just talk about all the puts and takes that we should expect in the fourth quarter. If we’re starting with volumes down mid-single digits, ultimately, should we see earnings flat, down, up year-over-year in the fourth quarter?

Jennifer Hamann: So thanks for the question. And I know this won’t surprise you, Ken, but I’m not going to give you specific guidance about the quarter, but I can give you context around it. And you hit many of the high points. So when you think about the top line, right now, volumes are down 6%. And that’s — it’s really mostly that international intermodal piece that we’ve been talking about and quite frankly, expecting all year when we knew against the tough comp that we had against last year. Now with that, though, we do expect to have — mix was a little bit positive in the third quarter, although we did have very strong intermodal in July, and so that probably was a little bit of a mix headwind versus what we would have been expecting coming into the year.

But I would say fourth quarter, we’re certainly seeing a better mix rotation with the international Intermodal coming down. But we do still have coal, which is below the system average arc that is going to be very strong in the quarter. We like all our business, you know that, Ken, and we’re diligent in making it all profitable, but there’s some that contribute more to that top line than others when you’re looking at the arc. And then below the line, talk about expenses. We’ll continue to have merger costs, probably not quite to the level that we had in the third quarter, but that will be there. But Eric and team, as you’ve heard, are running very well. And so we feel very good about the ability to be productive, although productivity, as you know, also is challenged when you have volumes coming down.

And so the team accepts that challenge knows that they have that there, but that will create a little bit of a headwind. And so that’s why when we look at it, would we like to have volumes up and blue skies and 37 degrees, as Jim said, great railroading weather throughout the quarter, you bet. But we will have some challenges, and that’s going to make it tough when you think about stacking that up against what was a record quarter for us in the fourth quarter. But when you peel all that back and look at how we’re running fundamentally, the railroad is running extremely sound fundamentally, and that will absolutely continue in the fourth quarter.

Ken Hoexter: And then specific to the [ rent ] question?

Jennifer Hamann: So we just had a couple of small — I said I called it out $13 million some contract settlements. Those were unique to the third quarter.

Operator: Our next question is from the line of Brandon Oglenski with Barclays.

Brandon Oglenski: Since you guys announced your merger agreement, it seems like your competitors are maybe collaborating a lot more than they have in the past. Do you view this as potentially a risk, especially as you’re going through a pretty complicated process with the STB here?

Vincenzo Vena: No. In fact, that proves our point about competition. If you take a look at it, I’m surprised they weren’t doing it before, if that was out there. So what happens is when you have a competitor that you know is going to be stronger and is going to give a better service product and probably at a better price, okay, because of less touch points that we have when you remove the touch points that everybody else needs to compete. But truly, I’m surprised that it took us announcing, okay, a merger for other people to say that they were going to do special moves and cooperate. So I think it bolsters our position in front of the STB. Remember what the STB needs to take a look at it. You talk about enhanced competition and this merger provides enhanced competition and you just see it the way the railroads are reacting.

Nobody would react in business if it was bad for the railroad that was merging and good for themselves. Listen, we’re competitive. If anybody thinks that another railroad would come out and be, all no, UP better not merge if it was actually worse and better for them let’s get — let’s put that on the table. So there’s only 1 reason that the railroads are complaining a couple of them is because they see the competition and they need to step up. When we do that, it’s helpful. So I’m looking forward to this as we go through and work through on the merger. We’re covering every point on the merger, and we’re very comfortable that the STB is going to see how good it is for America and how it changes the paradigm of railroad versus truck.

Brandon Oglenski: Thank you, Jim.

Operator: Our next question is from the line of Jonathan Chappell with Evercore ISI.

Jonathan Chappell: Thank you. Good morning, everyone. Eric, Jennifer just noted in one of her prior answers, productivity is challenged and the volumes are coming down. In your prepared remarks, you said you had the locomotives and the labor position for new business wins. We look at Kenny’s outlook slide and there’s actually more minus signs than positive signs for 4Q. So when we think about your ability to be nimble, your productivity or efficiency, as you’re going through kind of a choppy macro backdrop but with all eyes on the UP and your service during this merger review process, can you be as nimble and reap as much productivity if volumes continue to be weaker than expected? Or do you need to have a little bit more slack in the system at the present time?

Eric Gehringer: Yes. Thanks, Jonathan, for that question. So you’re right in your characterization of what Jennifer mentioned. When we are faced for temporary volume being down, we know that playbook, and it’s important that all of you understand that. And you start with what you won’t do. And what we won’t do is sacrifice anything related to our buffers, whether that’s locomotives, crews or railcars. So could we be a little bit more conscious about that? Honestly, I don’t think we are because we do that every single day. We focus on making sure all 3 buffers are intact and prepositioned across the railroad. Now what do we do? Of course, we’ll react to the markets. We’ll act promptly. You first start with your transportation plan, making adjustments that typically drive productivity in the areas of train starts and crew starts.

Then from there, you do as what you said, which is go to your locomotive fleet, make sure you’ve rightsized your locomotive fleet for the volume and the mix that you have on the railroad. You adjust your car fleet. You’ve seen us do that many times. Heck, we do that 4 or 5x every single year just due to the seasonality of intermodal business. Then you go to your hiring and you look carefully. We go through that process every single month. I’m personally involved in that process. But if we were to see volume being weaker in certain markets, certain geographic areas for a prolonged period, we would make adjustments to hiring. So I could keep going through the rest of the playbook. I don’t even have it in front of me. I know it so well, and so does the team.

So we will make adjustments to ensure that we continue to provide the great service we’re providing, but also at the lowest cost so we keep Kenny and the team competitive in the market as they go and win volume.

Jonathan Chappell: Thanks, Eric.

Eric Gehringer: Thank you, Jonathan.

Operator: Our next question is from the line of Scott Group with Wolfe Research.

Scott Group: So maybe just, Jim, like to ask it more directly, like [indiscernible] rail that seems like publicly opposed to the merger. Like in the past, maybe that has mattered, like do you think that rail opposition matters today, given all the other sort of puts and takes as it relates to this merger? And then maybe just separately, if I can, Jennifer. The yields ex fuel were up 3.5%. I know there’s maybe a little bit of mix here. But it feels like we’re like now more clearly in a positive price cost backdrop? Like does that continue? Any reason to think that, that isn’t sustainable looking ahead?

Vincenzo Vena: Okay. I might as well start and then Jennifer, you can jump in. Appreciate the double question there, Scott. It was pretty slick. That’s what I like about you. So let’s talk about the other railroad, and you specifically talked about BN. [ Unless ] BN is a great company as a great franchise, has a long history, and we compete with them every day, and we compete hard. And if I was in their shoes, if I was the leader of both in Northern Santa Fe or I guess, just like Union Pacific Railroads, a subsidiary of Union Pacific Corp., they’re a subsidiary of behemoth called Berkshire with $350 billion. So they can do whatever they want, whether they want to buy something or not buy something. And maybe if I was there, I would phone up the big boss and say, we need to do this because it’s better for the country and better for us.

But that’s — but if I take a look at it like I started, Scott, is — they have to react to what we’ve done. We’re the first mover to truly deliver. And they can — I would see the benefit if I was outside of this merger, and how do I gain the most for myself. And that’s what [indiscernible] Northern or Berkshire is doing is, is at this point, they don’t want to do anything. So they’re looking at it as a way, and that’s what the other railroads are doing is looking at a way that they can benefit. The problem that they have is this time, it truly is an end-to-end bolt-on. It is not a big overlap. So that story of I need access to the railroad just doesn’t fit. On top of that, Scott, as an industry, too long, we wanted to open up a coffee shop inside of Starbucks because we’re afraid to spend our own money to build in.

So you think about that. I want a new coffee shop in New York City. And I’m going to walk over to the Starbucks and say, [indiscernible] you’ve got a real nice store, would you let me open up my own counter in your store? No, open your own counter because if you have enough money, open it across the street, if you want, but you pay your expenses. So the way we look at it is when the railroads come up and save very sort of misleading positions, it helps us. The STB and the members that are there now are very smart. They know we’re not going to remove 300 lanes of traffic, okay? They know that we’re going to have more options for our customers, not less. So at the end of the day, they’re fighting a good fight trying to make the noise, but the STB in our case is so strong that I’m very comfortable that unless they change their strategy, then they actually help us because it doesn’t make sense when things are out there that don’t add up the fact.

Finally, as we are more than willing to sit down and have arrangements and have discussions because we have a very small amount of customers that are going to go from 2 to 1. In fact, it’s less than 10 customer locations, not even just customers. So what we’ve agreed to is we are going to provide access to those locations to another railroad to give them the optionality that they had before so that nobody in this merger loses anything. So we’ll talk to all the railroads and see who wants to sit down and have a discussion about it. Finally, Scott, I mean I know I’m being along with it this morning, but it’s sort of fun. Isn’t this a fun thing to be doing, talking about a great quarter that nobody really is paying attention to, okay, world-class quarter, with a world-class team that delivered, but nobody is going to ask us too much about that.

And then the merger that we’re going to change the industry and move it forward the way we should. So bottom line is I’m very comfortable where we are, and I think that we end up with a — at the right place with the STB because they’re smart and they’re going to work through the issues that are on the table. And also just a final point, Scott, we haven’t even put in our merger, okay, application that talks about all the things we’re going to do and people are already talking about what we’re going to do, truly amazing. They must be mine readers. They must be looking at our brains here and saying that wonder what Eric is going to do and Kenny and Jennifer and Jim and the entire team, okay? So we’ll wait until we put the merger application in at the end of November.

And then at that point, we’ll sit down and talk to anybody who wants to sit down and talk to us. Sorry for the long answer, Scott. The second part, Jennifer?

Jennifer Hamann: I’ve forgot it. No. I’m kidding.

Vincenzo Vena: I [ won’t ] speak as many words. I promise you all.

Jennifer Hamann: I’m sorry. You asked about price going forward, Scott. So — and then you referenced the 3.5%, the price/mix yield that we had on our freight revenue in the quarter. So we did get some positive benefit in the third quarter from the mix. And as we look forward, we do think, obviously, it will depend on how the business comes through. But as we’re sitting here today with intermodal going down, we definitely think mix should be a positive in the fourth quarter, tempered maybe a little bit on the coal side. In terms of price, the pricing environment has remained, I’d say, challenging, but Kenny have done a really good job supported by the service to go out there and talk with our customers about the value that we’re providing them through faster cycle times, more reliable service, and they’re doing a good job yielding some very positive price.

We’re not getting any support from the intermodal side of the world. That truck competitive market is still very, very challenging. And I would say, as we move into the fourth quarter and into the first part of next year, you’re going to start to see some tougher comparisons for us on the coal side of the world as well, when you think about some of the flexibility we have in those contracts with natural gas. But you put kind of some of those, what I’ll call, [ manufactors ] aside and you just look at what the team is doing and the combination of driving value to the customers and being very value motivated, profit driven in terms of what we can do for the company and for our customers to grow the business and get solid price, we feel good about that.

Vincenzo Vena: Thank you very much, Scott. Sorry for the long answer, but I thought we’d cover off a few points there.

Scott Group: No, that was great.

Operator: Our next question is from the line of Brian Ossenbeck with JPMorgan.

Brian Ossenbeck: Maybe a quick 1 for Kenny, and then a follow-up for Jim. So Kenny, just looking at the intermodal, it looks like there’s some share shift between yourself and other Western competitor, if we look at just an originated basis. I know there’s a lot of moving parts with international and domestic, but wanted to see if we’re reading that directly. And then, Jim, you mentioned that the customers are lining up, there’s a good amount of support, but 1 that’s been pretty vocal, obviously, [ maybe this is ] the Starbucks example you’re referring to. But the chemical shippers in the Gulf Coast, they’ve been a lot more vocal winning enhanced competition. Is that something — I’m sure we’ll hear about in the application, but is that something you can deal with directly? Or do you take that to the STB and have them weigh on it? And just how should we think about how that progresses since it’s a pretty big and important in vocal group.

Vincenzo Vena: So Kenny, do you want to talk about the…

Kenny Rocker: Yes, I’ll start off. Thanks for the question. We’ve seen a little bit of a market degradation for sure. Those are tough comp comparisons. We did see quite a bit that’s pulled ahead earlier in the year. And at the same time, with all the investments that we’ve made in our intermodal market, the new markets for international and Arizona and Twin Cities and some other areas in the service product that we have, we’re going to make sure if we move the volume that it’s going to move at the margins that reflect both the service, the investments in the infrastructure that we’ve made and the overall products. And so that’s what you’re seeing. You’re seeing both of those right now.

Vincenzo Vena: Okay. So on the associations, the chemical association that you mentioned, last time I looked, they don’t pay any of our bills. They don’t have a direct relationship with us, and we are dealing with our customers, and that for me is really important. Do we have to understand what the associations are saying and what they’re doing in Washington, D.C. and what their story is. But again, it’s truly amazing that they know already that gives you an idea of where they’re coming from, what we’re putting into the merger document and what we’re doing with access to CSX, access to Burlington Northern or Berkshire on the way westbound and access to the other railroads whether it’s the short lines that we operate [ with ] and handle, whether it’s Canadian National or Canadian Pacific.

So at the end of the day, we’ll deal with them, and we’re more than willing to sit down with the associations and explain the benefit. And the benefit is 15% to 20% on their merchandise traffic, okay, moving. History will show them that the railroads have not increased price, and this is in general for all of the railroads at the same level as the liability issue has crept up and what that would cost us and also how — what we’re pricing for the product that they’re selling. So that’s why we like to talk to the big shippers that we have. And when we talk to the big shippers, they understand it. But you know what, it’s a little bit and especially for the associations is there’s a trough out there, and they’re trying to see what they can get with it.

We’ve spent a lot of time with the — and when we explain what we’re doing with the political and regulatory people, they start to see — so you’re talking — Jim and Kenny and Eric and Jennifer, so you’re saying you’re going to be faster, really so they need less cars. They need less expense, less inventory expense. Hold it, you’re going to be able to move across the country, 15% to 20% quicker. You mean you’re going to remove 1,000 trucks of rail-to-rail or our portion of it in Chicago and other places that today runs on the highway instead of going rail to rail. So we have less trucks on the road. Oh, you’re looking at forward on how we’re going to do, okay, to compete against trucks, where technology is changing quick if anybody wants to go take a look at what trucks are doing now to become more autonomous as they move ahead.

Let’s go to Texas, let’s go to places where they’re being used right now. If we don’t move ahead, the associations okay, we’ll find themselves in a place where they’ll be asking us railroads to do what we’re doing without their push. So that’s where I’m at with it. It’s complicated, but I don’t know Brian, real interesting, but you would come out so strong when you haven’t even read what the merger document is, okay, is the merger application is makes you wonder where the heck are coming from. They just must be negative all the time. I guess what they probably are looking at our third quarter and find some dirt on the third quarter where we’ve really delivered strong as a company. Kenny, anything you wanted to add?

Kenny Rocker: Yes. I just want to say, our first approach is to talk directly with customers, not necessarily through the association. At the same time, we have — we’ve already done and we already have meetings on the books to talk to those customers through those associations. But again, the main approach is sitting down with our customers, large and small and talking to them. We’re covering it from all angles.

Brian Ossenbeck: Jim, the 15% to 20% increase, just to clarify, that’s a speed or a throughput? What does that number referred to?

Vincenzo Vena: Yes. So what I’m talking about, Brian, is that what people miss [ that don’t railroad ], okay? And I’m trying not to be [ flippant ] this morning because I woke up just flippant. I looked at our numbers and I was trying to find some dirt on Eric to make sure I pushed him and the team real hard. So that’s the attitude I woke up with this morning after about 4 hours of sleep last night like I was ready to go. So let me not be flippant. Bottom line is if you understand railroading, if you can remove touch points of touch points through a yard, our average and we’re the best in the industry is 19.9 hours this month, okay? So you’re going to add 19.9 hours if you’re going to move railcars and have to touch them. We touch them now before we hand them off.

On top of that, Brian, we don’t build blocks for other railroads because history has always said that railroads always look internal as soon as they get into the slightest bit of trouble. So you cannot rely on railroads to do what’s better when they’ve agreed to build blocks for you. So when you add that up and we’ve looked at the railcars, that’s where that number comes from 15% to 20% quicker because when we build the block coming out of Houston for the chemicals, we’ll build the block that goes all the way to Philadelphia or build a block that goes all the way to the Northeast. If the new Union Pacific is building a block with lumber coming westbound, okay, we’re going to build the block that goes all the way through and remove touch points.

We work on touch points every day. So that’s what I’m talking about, the 15%, 20% on the merchandise business, let alone what everybody looks at and likes to talk about the intermodal business, which is really important to us that we remove touch points and have speed. So sorry for the long answer, but I’m putting the points out there this morning, Brian, okay? We might not get through everybody. I think there’s only room for another handful of people. That’s about it.

Brian Ossenbeck: We appreciate those details, Jim. Thank you.

Vincenzo Vena: You’re welcome.

Operator: [Operator Instructions] The next question will be coming from the line of Stephanie Moore with Jefferies.

Stephanie Benjamin Moore: Thank you. Good morning. When you look at your service metrics, as you noted, they’re about the best they’ve ever been or 100% or so. Can you talk about your level of confidence and the steps you can take to implement your service best practices to [ NSE ] post-merger? And Jim, just the time line do you think realistically for some of these world-class levels to convert over?

Vincenzo Vena: Eric, why don’t you take this? But real simple is I think we have a history of doing this. I’ve been real [indiscernible] for a long time. You [ have me in a way you go ], you answer it.

Eric Gehringer: Absolutely. And thank you for that question. So you’re absolutely right. Definitely world-class level is definitely best in the industry. Now being able to take that over and partner with the NS inside the merger, that’s what we do every day. It’s just a bigger scale, right? We look every single day. It doesn’t matter if I’m looking at a terminal or a service shoot at an interchange point. Every single day, we’re looking for what are the issues or the opportunities dissecting the performance and individual terminal, how do we get 2 hours off of dwell, how do we get the trains out 5% faster. It’s going to be the same thing just at a broader scale. And look, I’ve been working with the NS for nearly 15 years. I’ve had a relationship with them in lots of different roles.

They’re good railroaders. Their knowledge of their network and our knowledge of our network combined aligned with the goal of being able to move cars faster in the most efficient way to be most competitive in the market. That’s the job. We all know it. We’re all going to do it.

Vincenzo Vena: Stephanie, I grew up working for CN did 40 years there. And when I came over to Union Pacific, I didn’t know that there was 2 [ Green Rivers, ] okay? There’s a Green River on our East West Main and there’s a Green River in Utah. So at the bottom line is the way I look at it is, I think you can see from example of real life examples. We don’t make up stories Union Pacific. We want you to judge us on what we’ve delivered. And you can see since I joined in 2019, what we’ve been able to do with this operation, and we will optimize. They’re great railroaders, they’re great people, the people I’ve met at that Norfolk Southern. But I’ve always said that every railroad should be able to have their operating ratio within 100 basis points of each other. So I’m looking forward to getting the magic that’s at Union Pacific and doing the same magic with all those employees and with them at Norfolk Southern.

Operator: Our next question is from the line of Jason Seidl with TD Cowen.

Jason Seidl: I totally get the perpetual dissatisfaction comment, but hopefully, you guys can take a day to enjoy some very, very solid results for the quarter. My question is going to be on yields, but Jennifer is going to actually be happy that I’m not looking for guidance here. How should we think about your ability to sort of directionally change domestic intermodal yields if sort of the market starts to inflect on the truckload side, sort of given all the governmental actions taken against foreign drivers right now? And also, when we look into [ ag ], can you help us sort of frame up how to think about near-term ag RPU. And so how does export RPU compare historically versus sort of domestic ag RPU?

Jennifer Hamann: Let me start off here, Jason. When you talk about the intermodal side of the world, as you know, when we expanded our portfolio of domestic partners, we did some market-based pricing there. And so when we see that truck market improve, that will have a direct impact on us. And we’ve also been very successful in converting business even in a very weak truck environment, and doing that in a way that has been contributing positively to our bottom line and feel great about those partnerships and our ability to grow that business. It really is service based, it’s market-based with our great reach and as you know, that’s an exciting part for us when we look at the Norfolk Southern merger and their vast intermodal network.

When you look at the ag side of things and you ask about export, it really comes down to length of haul. And with some of that business, particularly when it goes to the PNW, that’s a good length of haul. We’re seeing more export today go to Mexico, and that’s a good length of haul. I would say the only caveat to any of that is, particularly when the business is going into Mexico versus the PNW, that does slow the cycle times down somewhat when you think about the turns on those cars and bringing them back. Kenny, anything you want to add?

Kenny Rocker: Yes, just the fact that we have structurally changed the network and the intermodal. If you look at the ramps and the products, Inland Empire, that’s out there now. I talked about Phoenix but then also there’s other services. I mean, we’ve added new services. You look at moving out of L.A. in the Kansas City, you look at the West Coast going in the Louisville. So we’ve transformed that. You already talked about the portfolio, Jennifer. The only thing I’ll say about the grain business is the team has done a heck of a job growing infrastructure inside Mexico through business development, giving us an outlet when there is nothing there, on the soybean market. So we’ve been flexible and adaptable.

Jason Seidl: Okay, if I could follow up there. Just how do you think about the timing? Like if the market inflected on the truckload side, is it going to be a couple of months lag? Is it going to be a couple of quarter lag with your ability to adjust price on the domestic side?

Kenny Rocker: I can’t get into the actual contracts. But what…

Vincenzo Vena: [indiscernible]

Kenny Rocker: It is. But what else is what we’re really looking at is what’s happening with truck production. So truck production is down about 28%. We’re waiting for that to turn. And we remember this since we’ve added these new portfolio of customers, we’ve been on a flat market. So I’ve said this now for [ 3 years ]. We haven’t seen any uplift. And when we do, we’re going to take advantage of it. The [ last thing, ] Jim, we’ve had a record intermodal revenue on the domestic side. [indiscernible]

Vincenzo Vena: I got it. Listen, I’ve asked them the same question, okay? So it’s sometimes hard to get that out of them. But what I do like and [indiscernible] surprise you can’t come back is, listen, our revenue is up 3% and all this sort of stuff. But okay, Kenny. [ You didn’t get a better ] answer than I can, Jason.

Jason Seidl: I appreciate it anyway. Take care, guys.

Operator: The next question is from the line of Chris Wetherbee with Wells Fargo.

Christian Wetherbee: Maybe sticking with Ken, I guess I was curious about sort of the pricing environment as we move into next year. So I guess, do you think as you go through contracting at the end of the year, that pricing is kind of [indiscernible] is better in ’26 than ’25? Is it kind of the same? I know the backdrop from intermodal really kind [indiscernible] trucking environment hasn’t done much here just yet. And then just kind of curious or generally speaking, the response from customers, I don’t know if it’s sort of the conversation tones have changed at all in the last couple of months? Or are they still relatively constructive and as you think about next year? So just any thoughts around pricing would be great.

Kenny Rocker: Yes. So without talking about 2026, it really does start with a strong service product. We lead with the metrics both to and from industry and over the road industry as we’re working through those contract renewals. And we’re very [ clear about the ] pricing levels that reflect the service that we’re delivering and we sold to customers. And I said this in my remarks, we are confident because the service product is so strong. Now the question about what we’re hearing from customers as they look forward. They’re still looking for a little bit more clarity on the market. When we talk to our customers and when we look at our business, we’re looking at the current metrics that are out there are, the indicators and we’re judging ourselves on how we perform against those. So regardless of what they’re seeing, we look at are we outperforming in those key markets.

Christian Wetherbee: Just in the context of the service product that you’re putting out there, I guess it’s a little unclear. Does that drive better pricing sort of conversations as you go into next year? I guess, it may be — is kind of what you’ve been doing.

Vincenzo Vena: [indiscernible] this is the way and we’ve had this discussion pretty black and white. The entire time I’ve been a railroader, every marketing and sales group will always tell you that the reason they can’t [indiscernible] and price properly and win new business is because the service product is not high enough. Well, our [indiscernible] service product is so high that, that should not even be part of the discussion. There might be 1 or 2 customers out of the whole thing that could say, listen, you’re not perfect. But at the end of the day, it’s high. So that’s their challenge. That’s why we have a marketing and sales department as they go out there and go get business. It brings you business online because we have a great service product and price it at the value that we’re giving the customer. So go ahead, Kenny, any disagreement with me on that point?

Kenny Rocker: Not at all. And all I want to say is absolutely the service product helps us. So we appreciate that, and we’re pricing based on that service product that we’re delivering.

Vincenzo Vena: Chris, how do you like to work with — for me?

Christian Wetherbee: Good characterization of the service product. Appreciate it, guys.

Operator: The next question is from the line of David Vernon with Bernstein.

David Vernon: So Kenny, a couple of months ago, UP and Norfolk put out some marketing material around enhanced collaboration in the network. I was wondering if you could maybe just talk a little bit about how those changes are being made and how that level of integration is — would compare to maybe a post-merger world. And then if you have any comments on kind of what you’re thinking about doing with the UMAX program longer term, we’d love to hear kind of some more perspective from you on that.

Kenny Rocker: Yes. So let me just first off and say we have alliances that we’re working with, with all the rail players. I mean, we have the Falcon out there with Canadian National that’s working well. We have the same lanes, same markets that with the CSX that we do with Norfolk and [indiscernible] . So I want to make sure that’s clear, and we aren’t doing anything prior to the actual merger that takes place. Having said that, at the same time, yes, we are able to look at new markets out there. We talked about — or I talked about just recently, the market into Louisville. Again, that’s all aimed at over-the-road traffic that we’re trying to win. We have the same approach with all the rails. The second thing is, and I want to be crystal clear on this.

Absolutely, we want to make sure our customers have optionality. We’re going to completely support UMAX. That product is a strong, viable product that our customers are utilizing the day, that’s not going away, and we see it as a viable option in the marketplace.

Vincenzo Vena: Thank you very much. Thanks for the question.

Operator: The next question is from the line of Walter Spracklin with RBC Capital Markets.

Walter Spracklin: Thanks for the detail today. I just want to double-click a little bit on next year. And I know, Jennifer, you don’t have guidance out there, but you do have that S4 document that we normally wouldn’t have this time of year and the numbers are out there. They are below — you reiterated your high single-digit, low double-digit multiyear guide today. Those numbers are notably below range. I guess my question here is whether you can give us some context on how we characterize what you put in that document, what’s changed or what’s different from the assumptions that underpin them again because you did reiterate the guide and those numbers are below Street. So I’d love to hear any color you can provide there.

Jennifer Hamann: So thank you, Walter, for that. One of the things that is, I think, stated very explicitly in the [ S4 ] is that those numbers are not guidance. Those are our guidelines and those are particularly when you look at the out years, they are what I would call unstressed financials. I mean, we’re looking at market indicators. We’re looking at kind of run rates, those types of things. It is by no means what I would call a detailed look talking with Kenny’s team about where are you getting new customer wins, where are you getting greater penetration. It’s not doing a deep dive with Eric’s team to say, with that business overlaid, how can you drive greater productivity. And I could take you on through the [ West ]. So it’s directional, certainly, but it’s also something that didn’t include merger costs when you think about particularly some of the 2025 numbers, considered that we were still doing share repurchases.

So it’s directional. But beyond that, I would not try to extrapolate from that S4 numbers.

Operator: The next question comes from the line of [ Richa Harnain ] with Deutsche Bank.

Richa Harnain: So Jim, you said that no one is really talking about this world-class quarter. I guess after that, a couple of people did, but maybe we can tie a bow on it. This past quarter results were pretty remarkable. You managed 12% EPS growth with virtually no volume help. Labor productivity continues to be a strong driver. I think you had like another 3.5% drop in headcount. [ You’re coming out ahead on ] comp per employee. I think [indiscernible], you said 3% for the year. And last quarter, you guided at 3.5%. Eric, you talked about the overall records and various measures of productivity. But I think is this really the pricing lever starting to kick in Jennifer that you’ve talked about in earnest in the past around repricing contracts like [indiscernible] the work you’re doing to reflect the good service you guys are introducing.

And if yes, what inning are we in there? And then just like why shouldn’t the high end of your long-term high single-digit to low double-digit EPS target be more appropriate, especially into 2026. Again, that 12% on 0% volume growth really stands out.

Jennifer Hamann: Thanks. You did a great job summarizing our quarter and some of our very strong results. When we laid out our targets back in September of last year, we put some baseline macroeconomic numbers that underpin that. And we said that if we reach those numbers from a macro standpoint, we expect it to be kind of at the low end. So at the high single kind of range and that it would take a better macro environment to be at the double-digit side. Unfortunately, a lot of those macro indicators, I called out the housing starts and the auto sales on the call have actually gotten a little bit worse. The good thing about UP and our great franchise is and the way that we are running today and the way that we’re executing on the fundamentals is we’re being very agile.

We’re taking advantage of every opportunity that comes our way, and we’re pushing ourselves daily. And whether it’s improving on the safety front, whether it’s driving greater service, working with our customers to drive more value to them and then pricing for that value. What you’re seeing is us executing on all of those fronts and the end result is great financial results. And so that’s our mindset. That’s what we’re going to keep doing. But there is a macro backdrop that underpins that, that we’re fighting against a little bit right now, which is Kenny say it’s kind of 3 — year 3 — to our improvement. And we’re going to keep pushing. But we also have to do that within the context of where the economy is at and how we’re performing against that.

Vincenzo Vena: Thank you very much for the question. Appreciate it.

Operator: The next question is from the line of Bascome Majors with Susquehanna.

Bascome Majors: One for Jennifer here. You’ve got a little over $2 billion of debt maturities between now and the first half of ’27, call it, $10 billion to $15 billion in debt to raise to fund the deal when it hopefully is approved and closes. And you don’t have a potential on financing. So you’re on the hook to go through to that no matter how the capital markets play out between now and then. And so how do you think about sort of hedging your bets on managing the balance sheet for that capital need between now and in 2027. If you could just kind of walk us through debt pay down and do it all at once versus kind of opportunistically chip away at that over time, I think that would be helpful.

Jennifer Hamann: So Bascome, thanks for that question. So there’s a number of things that we’re looking at and planning towards over the next year as we progress through the application period and move towards having the merger approved. You mentioned paying down debt. We’re certainly going to do that as debt comes due, that is our intent. We’ll do that with the available cash that we’re generating. We’ll also be looking at because, to your point, when the day comes, we’re going to need to come up with that cash. So what are the different levers that we can pull to protect ourselves on the interest rate side, what can we do in terms of facilities to be ready to be able to access the cash because when you look at the calendar and you consider different blackout windows, et cetera, we were not going to be able to control exactly when that timing is.

So we’re planning for that. We’re making sure that we have the cash available to us to close that, working closely with our bank groups and feel very good about the plans that we have underway there. But then also structuring it to I think the last part of your question in a way that will allow us to quickly pay down some of that debt so that we can get back into a position when we’re in the market and repurchasing shares. And we believe that we’ll be able to do that sometime in year 2, which, for us, looking at it based on when we believe the transaction will be approved will be in 2028. So that’s how we’re looking at it. That’s our plan, and we feel very comfortable about our ability to execute that.

Vincenzo Vena: Thanks for the question, Bascome.

Operator: The next question is from the line of Ari Rosa with Citigroup.

Ariel Rosa: Team, congrats on the strong network performance, really, really impressive to see UP running so well. So Jennifer, you were talking about some of the weakness in some of these macro indicators, housing starts and other things. I’m just curious to hear your perspective on kind of the overall economy, where you see risks? And specifically, I wanted to hear, is there any kind of level of deterioration in the macro that would cause you to either reassess your synergy targets for the NS or even, I mean, in kind of an extreme scenarios or any level of deterioration where you would think about walking away from the deal?

Vincenzo Vena: [ One of the few of us get into that gave real ] quick. You always have markets that are going to be up and down. We look at what the consumer overall is doing. And so far, the consumer is staying in a pretty good place. So we’re very comfortable. Now there’s some specific markets underneath. [ Automobile and parts have ] gone up and down, whether that’s been positive or not, there’s going to be changes with what’s happening as far as where the production is going to happen, that’s going to change. So at the end of the day, we’re very comfortable and we don’t see anything that changes our idea of what’s possible at Norfolk Southern. We think the merged company — I know — I think, personally, on the operating side, there’s a lot of value that we can drive, okay, productivity and value for the combined company just because of its combined network.

But why don’t I let Jennifer and Kenny jump in and talk about the overall market and where you see the economy?

Jennifer Hamann: Yes. I mean, we’re still working through our plan for 2026. But just to build on Jim’s point, I mean this [ $85 billion ] investment we’re looking to make is for the long term. That’s for our generation and the generations to come. It’s not based on a short-term economic play. And certainly, long term, I think, American industry, American manufacturing, there’s just tremendous potential there. So the near term will be what it will be, and we’ll work with that. As I said, we’re still putting our 2026 plan together. But we will control the fundamentals of how we run our railroad, which is very productively, very efficiently and very safely.

Kenny Rocker: Yes. I’ll just say that because of our franchise, there are some natural benefits when you combine that with a strong service product to go out there and win [ where that the rock ] network, whether it’s our petrochem network, whether it’s everything that we’re doing to invest in intermodal, that gives us a lot of confidence. And again, remember, we’re out there trying to penetrate and create our own wins, whether it’s put in new facilities on our network or going out there and selling where we’ve invested, we want to control what we can control. To Jennifer’s point, we’ll see what happens [ with how and start ]. We’ll see what happens with auto. We’re excited that we’ve got a strong network and a strong portfolio of customers [indiscernible] it will change. But once it does, we feel confident that we’ll be able to capitalize on it.

Vincenzo Vena: Yes. And the final point I would add is, listen, the economy is going to give us what the economy gives us. We need to also have a railroad that operates efficiently and has the capability to flex up and down properly so that we win in the marketplace at a high service level. So we want to win market share, for sure, stand-alone until we have the approval mid next year, hopefully, of the merger. I know our Chief Legal Officer is looking at me sideways right now when I sit mid next year. So that’s my dream, but it could be a little bit later. But at the end of the day, that’s a win on both sides for us. And that’s fundamentally why — who we are at Union Pacific. All right. Thank you very much.

Operator: Last question is from the line of Brady Lierz with Stephens.

Brady Lierz: Kenny, in your fourth quarter volume outlook slide, the word business win or contract win or just really win in general is used a couple of different times. Can you help us understand what’s driving these wins, particularly at a time of economic and trade uncertainty? And how does your pipeline of wins per se look as we start to turn our attention to 2026. Do you think these wins can drive volume growth in ’26 even without help from the macro? Just any clarity there would be helpful.

Kenny Rocker: Yes. I appreciate that. Some of those wins are actually wins that occurred a few years ago, we’re realizing them as you have plant expansions. We had a couple of plant expansions that took place in the last part of 2024 that has helped us in 2025. We’ve had a few this year that have come on. And some are immediate, just wins that we’ve gone out because we have a very strong network and the infrastructure [ therefore ]. The other part of that, and we’ve talked about and I talked a little bit about it at the Investor Day is that the team has done a really good job of adding new facilities onto our network. In some markets that are mature, like the grain markets, you call it, over the last couple — few years, 20 new facilities on the renewable side over the last few years, 18 different facilities.

So that’s how we’re creating that value. That’s how we’re creating that revenue. As we look ahead and look at the pipeline, is still a strong pipeline as we look at the facilities that are set up to come on and expand. So that’s encouraging to us.

Vincenzo Vena: Thank you very much.

Operator: Thank you. This will conclude our question-and-answer session. I’ll turn the call back over to Mr. Vena for closing comments.

Vincenzo Vena: Great. Listen, Rob, thank you very much. Pretty exciting times here at Union Pacific. I love the fundamentals of what everybody delivered and then I have to give our team the accolades. It’s not one person. It’s the entire team that delivers and operationally on the marketing sales, I know I like pushing Kenny, but he does need to go get us more business. But at the end of the day, and Jennifer and the entire team and what everybody has done. So what’s some key dates and what we see coming up. Fourth quarter is what the fourth quarter is, we’ll deliver as good a quarter as we possibly can with everything that’s in the mix, and we’ve talked about that. And next year, truly, we have an opportunity to put together a franchise with the great team over at Norfolk Southern.

I’ve spoken to [ Mark George ] a few times. We need to legally keep it high level. I never tell them what to do. But at the end of the day, they’re focused, they’re on it. They know what they have to do, generate cash and be able to run a real good railroad so that we can show everybody what the combined railroad is going to look like to win, and we’re very excited about that. So next big date is November 14, special meeting and with our shareholders and see where the boat comes in. We’re very confident that the vote will come in to support this. There’s no reason shareholders will have any problem with it. So with that, let’s tie up this call, fantastic job by our team. Thank you very much for the good questions. And I apologize for the length of my answers, but I was ready to go this morning, okay?

And you could tell by where I was at. So November 14, I’m sure we — you can listen in or ask us questions once we put out where the vote ended up. Thank you very much, everyone. Have a great day.

Operator: Ladies and gentlemen, thank you for your participation. This does conclude today’s teleconference. You may now disconnect your lines, and have a wonderful day.