UNP - Earnings call transcript Q2 2021 | Union Pacific Corporation

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Operator

Greetings, welcome to the Union Pacific Second Quarter 2021 Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded and the slides for today's presentation are available on Union Pacific's website. It is now my pleasure to introduce your host, Mr. and Union President Chairman, Fritz, CEO Pacific. for Lance Mr. you may begin. Fritz,

Lance Fritz

Omaha everyone. Rob, call. Union in Vice Executive President and and constraints Rocker, you, our and Hamann, Operations; volumes Chief Welcome capability, as President their With Eric of Vice supply good today of Financial conference Thank to Executive earnings while our with morning, result team continued to dealing demonstrate Kenny Gehringer, quarter was Pacific's me Officer. Sales; Marketing are of Jennifer The financial delivered Pacific team in challenging The chains. all-time capacity moved important results. at increasing some Union the we second record

making Our serve, our and good to strategy on employees win are grow together.

Pacific income This per quarter XXXX Regarding our of is or $X.X second second reporting quarter of per share. billion, XXXX. quarter net or compares $X.XX to in the $X.XX billion Union second share results, $X.X morning, this

of comparisons by quarter While we are impact, impressive the the further achieved the COVID comparison results during skewed quarter. the to to demonstrates XXXX second last year a

XX.X% an Our ratio of is quarterly all-time record. operating

In as per These franchise profitability highlight addition, income, the for records price Union how the is levers we results, and share. pulled team volume running all to records simultaneously, and income deliver we Pacific set net quarterly earnings operating three productivity.

of best using truck. to the The eliminated an X.X quarter their milestone versus we're greenhouse rate. our tons carbon achieve consumption our reduce quest to they goals as emissions. fuel ESG second too, And gas achieving footprint, critical marked achieved greenhouse metric in efficiency rail our element our also second as quarter, gas emissions fuel quarter reduce in is Locomotive we helping a important to the goal by million customers

rail second the felt financial disruptions costly impact and supply our in customers our results were incidents. the equipment of impressive intermodal quarter, chain While,

Relative parties and the the end and Within and with are efforts these network an was utilize training, To improved our and actions will capacity to the the best-in-class safe. We're the redoubling chain. impact their the Even demand. on the final on so, we'll number impact, it's Eric as rate customer from boxes of likely to mitigate while to incidents, and all falls communities rail move actively short notable. crews, destination of in numerous intermodal year, to the our root taken start working with our analysis issues to customers our equipment our operations. the through to that end, technology, ramp our keep space, update cause supply persist we've

Eric Gehringer

Thanks, for Lance, I'd through this operating thanking we’ve to faced department the and transitory their entire support first-half like good the many year. challenges by begin during the our customers, of morning.

there's to us real events long-term, don't past we see get to these done be While them. impacting work

X, metrics the to It's low at that the XXXX of the Moving quarter. included skewed. Slide a months are at pandemic. a volume taking important couple start historically for look a our little year-over-year key note performance comparisons to

give a to principles more freight car reduced velocity improved train normal, XXXX that volumes. car and the So comparison seasonal little speeds. to Freight a PSR as from terminal of to provided we've due said, execution context Lance dwell XXXX more improved

miles back with achieved year. this we to still do goal the fluid running XXX we to However, more XXX return per return to network, have range, the work day to metric a to to this earlier

time has our see, by service can in over planned categories. you both trip the measured improved as As reliability service compliance

network the congestion space port dock service notably into in port impacted chose terminals, some our help West to east, meet metrics supply Chicago. inland has in is have quarterly now do current However, and congestion expense operations. most moved our international by At significantly. expectations own moving assets or in especially the of that our our not the we more Disruptions customers. But intermodal chains reduce of Coast metrics, affecting that our of

We to the and to volumes, help as continuing and Global our from while customers ocean the for ports. address proactively Chicago team sustain storage. maintain we shipment are also carrier congestion, the and inland with in working To III fluidity, an temporarily alleviate reopened congestion to commercial use

working and storage also develop We additional are to options. with our transportation customers

owners, We port all dray to fluidity the international supply of providers, ocean and customers, beneficial members will with of chain, to carriers mean operators, flows. work continue the our carrier chassis freight cargo

well. During the as costly equipment and first-half, our rail incidents has weather by impacted been network

We frequency incidents. have the progress on made of rail reducing good

of on and effect auto on metrics occurring Ultimately, recognize manifest notable route However, main both a sunset a importance West East and trip incidents the of customers our location and measures. our we compliance these had planned our to couple corridor, intermodal growth the of improving strategy. support our the long-term

measures, X,XXX plans. efficiency record, focus fewer miles more an growing workforce optionality These Turning locomotive result volumes which has provide over plan XXXX productivity quarter X% car was quarter. in by X, progress more in workforce and driven feet. since productivity more team of flat. levels Workforce good transportation our continue the make second than Increasing all-time locomotives. consistent while in transportation improved running improvements train as were driven to daily locomotive XX%, was continued increase Slide grown the an we also requires productivity on that and of just to in Improvement efficient both by our an adjust to the by to remained the linked, with quarterly

and run customers. a train our on continue reliable will We focus more efficient to to for railroad length

is personal achieving one siding and role every network safety our our on size, safety program. team increased. a X, the play have to injuries fuel programs, than important sidings Wrapping peer-to-peer completed long-term bidding train of our our results gas mixed. emission we continuation our improving continued greenhouse program. have or focused been goals. was quarter been we the increase next Slide our Through construction Year-to-date, operating a XX additional rate Courage-to-Care has our Through The incidents department is work first-half seven more understands performing X, length California. day. decreased, other up on productivity in last the record, and X% Real the train initiatives the growing consumption and year, sidings. are second the equipment in on Recently, in injuries, entire we've of which driver is extension personal address maturing impacted began To of but Slide to Northern process Turning level wildfires our technology, by safer compared year.

team significant to repair clock reopening Bridge bridge. around The August. structural Dry the north Current Our is Canyon working California of Redding, have the a projections sustained late damage. in

during as commitment. level and added that are We will guide our and service well remains challenges, to network traffic crew seen, the guiding to rerouting the transitory efficiently operating and in our to volume and those speaks you've I our as actively product which adding to shipments. and efficiency deserve. time improvements transit these we have excellent the productivity network. and expect that Ultimately, the locomotive customers through and requires resources, an return customer additional utmost we PSR area, quarter The confidence did how our that our job team our principle

will provide volume far that, to turn plan the the be with every to it execute I over structure more cost ability who testament on a day. is to, environment. an our to With employees Kenny, business variable Our update our

Kenny Rocker

and Thank you, morning. Eric, good

the onset as Our the coupled saw increase shutdown XX%, XX% the and pandemic. we the gains. a core share current second our order improved ago, little provide that our business, versus from clearly fuel into comparison walk to from groups. business volume each the of up pricing through a quarter, this quarter In more to economic as major the color I will from easy last volume have was year sequential revenue We all markets up to Freight a quarter I higher was surcharge with of first comp the due year. also of

as our XX% first X% carloads revenue gas up were year-over-year the natural up consumer higher from in both Storm as year, and continue XX% export COVID, increased quarter, coal of surcharge to year-over-year coal So, average applications. year-over-year exports. Winter and demand, and COVID-related agricultural from strength And increase for shutdown. was from well strong to demand, due domestic car, grew XX% up products quarter the in recovers seasonality by revenue. truck higher volume, Uri a up higher the Revenue bulk first first food to economy the pricing quarter, started with first in was per gains core the fertilizer recovers let's from grain. XX% due increase production in shipments year-over-year X% primarily a volume and as due and fuel Fertilizer along domestic compared commodity. quarter, reflecting and were Ethanol renewable improve supporting last increased and penetration. carloads Coal to driven X% Grain by driven and grain the demand quarter, prices to also refrigerated XX% X% and from get as with and growth from XX% finally, the

offset to quarter, an increase Moving we're by volume, down surcharge. with in as core were for first year-over-year, positive car of from specialized shipments and but oil were a X% higher coupled XX% increase traffic, strength fuel average seasonal on and fewer pricing to driven XX% by and shipments, in a gains LPG crude industrial, shipments industrial per in mix a specialized Energy revenue the XX% compared up improved quarter, revenue X% the demand.

was second over demand, strong road. stronger from Lumber storm improved quarter XX% along quarter. and the first from XX% chemicals was the both repairing first sectors bright and sequential shipments first year-over-year quarter driven minerals X% February from Forest products quarter, year-over-year as remodels, a comparison. the growth the by production with grew increase plastics the moving up increased as continues Metals the and to were and rates recover. and recovery penetration product over drove XX% year-over-year the demand. the spot, Gulf housing for and start, The driven rock this by up steel industrial volumes Industrial be XX% Coast shipments of volumes further from and

volume per volume containerize now was by a first the improved gains. and strength overall year-over-year, retail quarter, from import, global down XX% intermodal from volume. intermodal in Average higher surcharge Automotive despite by parcel revenue the supply positive was traffic continued year-over-year, for mix on quarter to saw semiconductor-related but in benefited the and recent business by the wins, particular, first from quarter. increased International chain. in for the XX% in e-commerce. in Domestic from strength XX% and pricing continuous parts. Premium, Turning Intermodal driven car to core congestion ongoing X% strength sales up compared XXX% increase up XX% revenue increased shortages XX% revenue, of fuel in

looking Now, export the gas XXXX. ahead to futures of remainder the based as well natural commodities, as the to for the demand. our out expect Starting bulk with stable of we on coal back-half remain year, current

Our continue penetration as products grain food and refrigerated improve shipments optimistic business, also increased to from growing in ethanol will the nation demand, COVID our strong, recovers the and wins. consumer coupled focus as shipments renewable We're with diesel from with truck should our be market.

for as positive upcoming Lastly, quarter, top expect strengthen export the supply well third year-over-year signs as year. harvest of the in while comparisons tight and we the demand, back-half in we the grain see

the our are industrial look our market favorable. year-over-year ahead to commodities, energy we comps for As

crew However, warehouse with uncertainty plans by crew there supporting is shipments. still

the and the of rest the impact We be production industrial continue for of strength markets. XXXX, positively forecast many which to our by will encouraged

XXXX volume In the XX XX in year. are million almost us to addition, to will of sales million automotive increase remain strong premium, forecasted the And from second-half product in in for for XXXX. lastly units forest

supply to However, for eye on we related the are semiconductor a keeping watchful parts chip. the chain issues

to the and regard and our importantly, intermodal, work of economic we remainder Jennifer. customers I'll by win continued inland the by to to along network create together of rail, drive in constraint away teams, fluidity. service year. truck intermodal supply inventories containers international capacity be I'm as limited expect commercial to intensity ramp. the continues chain will on the intermodal, restocking with haul should through to volumes solutions the and to to Now with demand the road by remain constrained switching turn pleased encouraged But to for by encourage we to The chassis year. from been international to improving entire With supply. our historically and over conversion the on of the remained strong tampered teams’ the strength it commercial operating notably inventory side collaboration most low, sales higher rest but this our in Retail between I've domestic more for And from Overall, ability outlook, with our marketplace. that, over improve our

Jennifer Hamann

good and Kenny, Thanks, morning.

one-time states in recorded impacted with fuel you in improvement XX.X%. throughout and estate a per XXXX line, the last is ratio a news earnings associated of aside financials impact two UP’s negatively second our that month Setting heard second of earnings Pacific XXX lag by we our of three gain ratio operating previously points, fuel, results estate demonstration and quarter an share of good to corporate record a fuel As efficiently Lance, to ratio positioned These are share. and of from lower earnings effective basis with year reduced prices per quarter. real Union Below to the earnings Rise tax $X.XX core added are $X.XX. share. the growth of points, $X.XX offsetting the programs, recorded $X.XX per rates bottom-line. operating drove in Partially in items surcharge and $X.XX on real and performance gain our by per rate basis quarterly the XXX share and how tax volume quarter leverage to announced added clear operational

seasonal to more now statement context well by Looking at a quarter's comparison showing this XXXX, on levels. second XX, is additional second with Slide as our to periods we're results our This provide quarter XXXX. to as of income results comparing normal quarter volume where

to of car the loadings then XXXX, XXXX second year only and seven almost were versus XXX,XXX, quarter in this in day XXX,XXX XXX,XXX. perspective, rebounding For

not quite pre-pandemic So, to back levels.

handling to Net $X.X quarterly of per earnings produce volume were and only quarter income billion. and For operating of quarterly efficient records. combination of of operating up income XX% record the XXXX, second also up revenue $X.X illustrates share growth operating expense XX%, billion our

the of XXXX, Slide and the revenue quarter a quarter. billion Freight sequentially second in XX basis $X.X quarter, totaled Looking at XX% more first provides year-over-year to freight and up closely both first versus XX% revenue, a revenue, breakdown compared our to up on second compared the quarter.

a surcharges the volume basis fuel Looking rise the first volumes. XXX analysis, at surcharge driver year-over-year year, XX% revenue up last Fuel increased impacted quarter compared XXXX points as largest pandemic second was the in yield of environment, freight programs our against fuel in to to by excess as by adjusted actions we supplemented continue gains improvement. a mix, positive our year-over-year of were experienced demand those basis, And prices. a slightly further pricing in total points strong business to dollars inflation. On driving XXX basis

at creating basis actually revenue volume pricing quarter again and weather negative basis against impacted first than was largest Looking surcharge Sequentially, up the more Business increased was revenue of points. positive fuel driver growth, gains point mix points basis freight XXX offsetting a volumes. XXX freight headwind. sequentially, sequentially, XXX

is second an quarter, than of quarter expenses success we growing Slide to structure. in our on And of benchmark being of move excellent With XX% a our slower seen through up variable rate. volumes as summary results, the have let's provides our Now, did operating job you cost more volume XX, our with which a expenses. at

individual and the benefits expenses XX% at compensation up versus Looking XXXX. lines,

workforce Second flat compared were described. strong workforce generating last quarter very year, productivity, to as levels Eric

offset some as as Offsetting to management decreased mechanical while more as Specifically, our workforce Purchase we up Quarterly the equipment expense costs $XX well variable experienced the and such by response some year-over-year rate, X%, recently, driven up to network was recrew a increases around expense associated year's increase improvement employee, was drayage an lodging increased million, volume overtime, volumes. driven of decreased workforces together and more outages. consumption continues increase be subsidiary Equipment fuel as by pandemic, higher comparison by Other driven train for in last related and and efficient related per other productivity as mix. engineering Offsetting in our of transportation or services favorable other in prices, X%. X% train our engine over XX%, were fuel of cost costs, expense as expense increases. energy expenses, XX% volume management, to $XX with higher fuel crews. increased by elevated the partially equity more well materials negative business million only this items. and and actually the decreased and rent a higher TTX XX% than increase fuel rents primarily our on inflation, incentive volume by due and were increased These XXX% one-time actions management of of wage some compensation. X% our and in offset income, against partially a drivers XX% stored higher initiative volume this

increased taxes. insurance expenses expense The other $XX state XX% and year's line $XX by million this driven last reimbursement, quarter, higher higher or casualty million local and

as quarter, the tax the closer be rate annual during to X-K for to Lastly, year. previously announced in our we effective XX% an expect

of Slide at despite discussed, continue our productivity. the challenges operational efficiency solid that we now results on generate some Looking XX, Eric to

productivity quarter our productivity. locomotive $XXX by total Productivity million. and continue to year-to-date bringing be results train totaled Second million, length improvements $XXX to led

our is As long-term at we Day, our efficiency incremental better margins. stated of a indicator Investor

So PSR demonstrating XX%, on incremental the margins impact looking very we of is a at positive our quarter, achieved strong having operating this models.

of in from a $X.X operations of $X.X from deferred was billion payments the year. tax decreased slightly decrease to cash This decline. result XX, XXXX, Slide in to X% last Turning first-half XXXX billion the

returned we've delivery the free accelerated program discipline. highlighting our cash up our $X or a in This capital rate strong by conversion $X.X cash and in of and to initial what's cash ahead was and industry-leading growth billion debt up a are shares $XXX by quarter. flow which issued May, million first by generation share par to headwind with $X.X in X%, balances, debt challenges. our strong Supported a from the repurchase ongoing to we finished XX%, optimistic includes and mid-May. quarter cash year the our of around billion. XX established with repurchased We million second Our EBITDA point flow first-half we totaling XX% billion over ongoing one the increased quarter, shareholders during X%, dividend Wrapping the outlook times, increased as in funded back-half comparable volume on the for just are adjusted we XX, full new a standpoint, market Slide the XXXX. includes energy ratio of on a From about increasing X.X year-to-date,

We tough impacts also mentioned, continued intermodal semiconductor impact loading. the turns shortage. in to both intermodal comparisons grain, asset well from as as see supply in chain the and you heard likely as space are And challenges and slow Kenny

see On the side, and on industrial the growing executing we grow team customers. our sector, flip is to win successfully plan confidence with and the in

that initial is operating achieve and $X or as at target we're for to ratio, which generation at end is range $X roughly originally the operating expect planned. strengthening our Looking plan more billion cash share points XXX approximately of low improvement, outlook, or of our year XX.X% billion now growing for basis dropping an XXXX. repurchases, closer would we to we With than had full ratio

possible plan, these stock purchase the not our of Behind opportunity efficiently and without from customers. record Finally, want who benefit these team attract the new entire results safely works acknowledge to with great new the and to UP’s success. is business company's team, member has UP be our to employee of workforce. And serve each a more I numbers that would

turn to So it that, I'll Lance. with back

Lance Fritz

Jennifer. you, Thank

accelerate. pace we we The at improve has start, mentioned performance, must I everything it's to at foundational our our As do of progress to safety Pacific. Union the

level customers As service the Eric our our we're demand. improving dedicated products expect to and stated, to

safe, goals All of predicated reliable service and a our consistent product. long-term on are

Kenny, As from customers winning you our business. with heard we're and growing

uncovering. we're seeing are opportunities our the excited obsession and increasing and You're focus in We've action. customer that creating fantastic got momentum we and about

to start strong quarter Investor working we of outside chain also of But in issues position Pacific. that set remainder The the of in We're supply the our at results table to the the provide achievements a results early set that long-term continued year. as for for our we of year. bright for we be solid These overcome various across in the faced workforce is second the targets we out to the all toward will together. parts likely of second-half our Given the the a congestion future Day Union fantastic laid three for stakeholders, very win deliver years next May. value UP,

the for let's that, with So open line your questions. up

Operator

Thank be line And of conducting question-and-answer UBS. from Tom session. you. the you. comes Thank the first question question. We'll proceed Instructions] Wadewitz our Please with [Operator your with now

Tom Wadewitz

Yeah, good morning.

this gain the Thank times, rail to gain Lance, just on make a you. the was action but is is to truck where ask Or, better obviously this Let's Is you versus guess, know think good reopened about service? that that significant hurts something took broader really is it issues, it you you extreme an the ability confident to perspective, be pitch logic, was truck And see, wanted I and network that constraints. don't share a unusual network for or from G-IV you're in and I Obviously, that unusual, that then we'll or broader your for a issues Kenny, strategy? fear bit that. you maybe there at headwind service week? I a from

Lance Fritz

start. Thank then and This you, to Lance, I'll turn it I'll Tom. Kenny. over is

conversion that pause ultimate their centers. a taken boxes get customer the network And users, overall, for allowing around can able all and warehouses we've so think, them clean we the take those supply intermodal which off that current service that no terms ramps be in view fluid The about product We largely international product. in to in to with pointed is our the which little service we adequate operation. we that or distribution shippers one the off constraints, saying going for G-IV long inventory, Kenny environment, So, end about I we to we've in them can overwhelming to at demonstrated the appropriate inbound demand is with ultimately into more issue for in start containers, way the out those But convert a capacity run. while. think our still There's truck of chain, be and as is that's that's current transitory. truck this and

Kenny Rocker

Yeah, right. Lance, you said it

I up and a that with And minute tell right some this strong daily and more we sat there. Eric, more our international that the more added out, what we mean rails, to by started had you, trade. increased this, is on supply with went coming added start, the for just short down meetings back we and we and just members customers our in say we long and out ports jumped pretty the added we first executive we chain a saw customers, that demand rails, basis, with I'll saw train all flew me Let I chassis, from we as soon as

also up to finally, up And people know for off solutions. held came also help we of the loop work type to through our a intermodal That's to G-III. forum international don't with try to solutions. ramps. up offer an solution solutions all with we where executive BCOs came is What we with customers inserted more the with of drayage off We of ramp

So, chain. customers, the with not in in only but we've been hand working supply hand everyone our

see you that help the And network. so, pause us the balance should

a on transitory, is broader we don't this being see Now, around level, this forever.

going so in good it can absolutely, very truck far, that improve, share. we're We've win future. the We feel we more what thus velocity do continues about the we to to demonstrated see expect we as

Tom Wadewitz

is or think the you to that? is can going Do be that a done you that week within haul comment -- on

Kenny Rocker

make early on in I the stages right What we're that daily is working way. demand matches that a basis haul to that now. say We're can the sure

Tom Wadewitz

Yep.

Okay. Thanks the for time.

Operator

comes your next the question Jon Please question. proceed Evercore. of line from Our with Chappell with

Jon Chappell

service Good of seem in environment some pretty you. customers with and to balancing to little going super be to forward? speak of that issues across as service And push there grabbing seems the pricing bit balanced sticking being incredibly a back coal, with more on you still robust, year, Kenny, given even outlook still cautious be issues headlines, your front? being the much especially conversations a morning. even maybe all sectors. price you're to the where to the you, chance Can Is these all coal the still the able your Thank pricing basis for through you're to with conservative July. it relates a and consistent maybe April, the in back-half on

Kenny Rocker

Thanks, Jon.

got lot a here, all. You've questions to answer of try I'll them

So first to all, environment, capacity. we're the tight tight there's going and the there's pricing market of capacity, dray truck to price

price this to about at international intermodal to were second-half year. other playing us business, we for of challenges even look the say of important that year, are our it's on part look our brush improved of broad think out we first in do to price good acceleration You felt at that we in to I as intermodal the and that areas. now able call not a the We've all take. the or have moved

for is that So, we sure, the at about then we be we the there. And as we are year, think the are, get and futures price volume the rate of as for run look more the look to question and where rest able see we of the the last today rest year. will coal, consistent that for

Jon Chappell

Thanks insight, it. Kenny. your for Got

Operator

Please is Morgan. Ossenbeck The from proceed question. with line Brian JP with the of your next coming question

Brian Ossenbeck

looks rest either basis, Hey, on that to wanted start expect was throughout a that and It the the developing back-half outlook about year. core sequential would the the way good your see in like I question. still turn commentary positive. how should you the morning. of volume the mix Thanks of ask one the about here pricing for and it that weak of most year, just gains there. given taking But I to

fuel which by on the in for thoughts appreciated? there also impacted economy, as any be implications also So we has been about talked past the would mix? And adverse

Jennifer Hamann

So I'll Brian, jump in here.

not You're grain and mix around that continues, talk just there may efforts We Whether using, we as of consumption we that that and relative we to a mix to so primary stable, drive the Kenny little bit ourselves. did us. need our really change kind we're or saw better performance -- that our mix, the the continued on. right have locomotive coal from are know help heard is counting But, about coal a relative that you've running fleet, fuel staying how but a technology that something to not sometimes, we're strong. we're benefit

very that year, In a grain last ongoing how we just third sequentially autos the mix some mix. little a and year, plays at but terms pressure, not year-over-year And to so It second look the basis, quarter grain in of at I of play the overall a big in point. see role bit for your do strong the a We as quarter, particularly grain. potentially had there. we beneficial role back-half was could with on look

And see to quarter. shortage losing relative chip of those you to with Intermodal a is going good maybe some But obviously to autos. there so, we're of what for, the to the top challenges. things that to visibility throughout chain and we're really are side get watching supply happens bit strong, stay these that watch little the guys

Brian Ossenbeck

was that on implemented been initiatives specifically fuel, all working you quarter you've of of accumulation And, there the was this on? just anything kind

Jennifer Hamann

know special anything comment I did quarter. that was want there don't don't on I to that. this you believe we Eric, if

Eric Gehringer

of big to fact this continue before those on ones things in as BMS, fuel units to to And at of initiatives. more talked being point in continuing our efficient. accumulation even we dozen year. implementation to continue lubrication, the work more got waste The more the side than modernizing direction become be of invest a all able initiatives, look The with XXX locomotives, about we've and our that we've

Lance Fritz

for the part sea a is two Brian, hits impact, us. gas it buttons that cool critical emissions got rate maybe it's more about importantly, cost a It's got greenhouse impact.

Brian Ossenbeck

All Thank Exactly. right. you.

Operator

proceed next the Credit your Suisse. line from question. Landry of The question with comes Allison with Please

Allison Landry

to to you continued wanted I I improve morning. that ask train Good mean, about Thanks. guys obviously, meaningfully. lengths.

upside you get curious, to And all well? an I'm the the additions? you. of the guess Thank So, the for feet I drive given second-half improvement see volumes million the year-end? or help as in sidings I of we potential this XX,XXX productivity QX can $XXX pace imagine year? does by target And, to guess I in can increased acceleration

Eric Gehringer

you for Allison. question, Thank Absolutely. the

be point, the siding year, us your and more to So, of XX year, our in to end efforts completed extension the to at the able the assist lengths. was train completed certainly work yes, grow be for seven to

to we're working these as that all tell focused point day. is levers that you, the our specific grow continue As and combine I've so number that will I temporary which of you efforts, improvement, one also beginning team not transitory we've year. on headwind we stop I'm a through process our the third it single become they i.e. all of entire is to the how transportation out continue of guide trains. been end does outage we rest drive of day us some the though, in that year. focused after through by the understands have bridge the looking the biggest going to also on our the the of mentioned I'll a What though, certainly events, our not productivity. to plan at it's that to on will really before, of I-V quarter to And

Allison Landry

perfect. Okay, you. Thank

Eric Gehringer

Thank you, Allison.

Operator

Group next question Research. line the Please with question. comes your from of Wolfe with proceed Our Scott

Scott Group

the improvement little operating this a can go ratio as just we you. just trends margin? think And referenced we Good the much numbers some ratio into maintain put year-over-year you margins, back-half? you Is thanks. bit, equipment to sequential costing? normalize there that's incremental some to any morning. do level you when incremental incidents. Hey, of do around think about should then, see operating Thank we and Jennifer, way start And you how think as guys

Jennifer Hamann

Thanks, Scott.

terms kind in the equipment of would incidents, put casualty our we together. of So, all of costs

So yes, have equipment we incidents. did some

in about cost We have bit expense, say of accruals. all quarter. terms in that nickel probably our And of and injury personal a I'd little a higher environmental the some on is

how size I that's So would that.

our margins, the and the in quarter XX%, In ratio margins second strong. very incremental terms of operating

we maintain that think pace I back-half. through can the

though, tougher help we would see well. And If that sequentially. not We do could we mathematically, operating that we volumes as have kind If there, the sequential of being, probably say about obviously, flattish the our XXXX. into say comps, of move back-half going level guidance, that see get you as upside can XX.X% think I'll ratio we're just improvements. to some

Lance Fritz

We're to that to XXx a Yeah. not operating I going performance. of there's Jennifer, that’s like just want we're hell improve, ratios. a terrific It's point an out, if there XX.X, satisfied. are but not camp out opportunity to

Jennifer Hamann

terms our XX to of long-term And of incrementals the Scott, and longer-term absolutely. mid next that in XXs. year, course, aware goes having then guidance high of No, getting that to in into you're all that

Scott Group

you. Thank

Operator

Ken the of with question America. comes with Bank line of next proceed Please your question. from Our Hoexter

Ken Hoexter

right. morning. Jen, could comment, Good if follow-up on great. Hey, Lance just that I incremental and

of yet you're target think if So, maintaining your that XX.X. the DLR you increasing the kind target, second-half, at volume you're about

So, of to the on just the through walk kind you see leverage want network.

you've carloads. If been got in room XXX,XXX you've still, weekly

at down mentioned You XXX,XXX.

operational got seems benefit. it still room So like you've for

current negative should have the in quarter. in second-half up fuel You after catching a the getting

the there is So, the basis better you've anything got, XX.X than that given a to that volumes? target additional points lead XXX of wouldn't

Lance Fritz

out. tailwinds, that of headwinds in headwinds kind I'm Jennifer and into are in perspective first up you're say to corner There's start the a recognizing. that incorporates And balanced second-half. be a which dot also our operating to we terms but the I painting of full showing something. mapped was quarter, there. think XX ratio, there's got year to some Ken, going of be course going in the us There the are

Jennifer Hamann

July at to from And quarter a outlook. end point today the But second volume your did to really And ending is we're isn't you Ken, if where look of we we're pretty out at Yeah. slower in of off unusual. terms of bit that, a our start, the up through which says the year. flat that

of Xth kind You've the July July of XXX. got our the holiday, now is high rate but day run seven right for

issues space on to So an impact are some that that obviously on these that top-line. And going we've see transitory are intermodal the having of pickup. in got

XX.X So good, would us feel very forward. I sets up be going a record great and performance

Ken Hoexter

Thanks. Great.

Lance Fritz

All right. Thanks, Ken.

Operator

question Please of with Goldman the your next Jordan is line from Alliger proceed Sachs. question. with Our

Jordan Alliger

Yeah. Hi.

maybe referenced Given resourcing, that reiterate touch you around second-half bit well. little congestion other of still a inflationary headcount your solid the as and perhaps is be costs on specifically can thoughts demand some very it issues, headwinds? may of maybe cost congestion some pressures lurking you and that Obviously, this Thanks.

Lance Fritz

But, as Just to into see into going the be and is to we going We're around clear, maybe I comments in look have attrition. in hiring in in look our significant right to prepared think or employees, headwind fill it's demand any as what the there think stay is this, profile care vacancies that about we've second-half, our number. out XX,XXX even going that now that hire be. program to of headcount we to to ballpark, we don't we take and here headcount or said

Jennifer Hamann

exactly that's Lance. right, Yeah,

might set look XXXX, initial capital to Obviously, at regard feel it's still Jordan, our X.XX%. those the year. But really up you might inflation full looks our that well. good When and Certainly, looking for largely we're terms wages guidance year We line. our still about flows on be with of what and are are with like how those And year. we as So next other greater. inflation, setting contractual is that. in that services, guidance. that We'll see contracted we're that you to XXXX materials do relative purchase good basis through inflation with recall, think costs,

Jordan Alliger

this estate a follow-up, dollar amount can for give benefit? gain as quick Thanks. the you before, real just the you and And tax maybe the said

Jennifer Hamann

estate amount an last of that dollar estates. head. that think recall year, estate you'll taxes benefit is what was right I have $X.XX for I from real the gain, real the and $X.XX my was. gain the It had between together in The front real of course, And we

a So good down $X.XX to guide. net-net, those came

Jordan Alliger

Okay. Thanks.

Operator

comes Chris with Wetherbee with from the of line question Please your proceed next Citi. question. Our

Chris Wetherbee

than you areas kind of of a obviously dynamic opportunity of make or if Good of about that get Hey, to rest buckets bit better curious there the a do with other you in little bit help half service bit the color that the the more more little sort how the a and the rest momentum opportunities talk you feel bit of give we the for where sort outlook productivity year? year? little that of morning. of back-half are that of make to could does Maybe challenging pretty that play maybe us the a million? get, good year, in of of Just service maybe kind And of kind around about see kind $XXX of little for thanks. various the kind then

Lance Fritz

about want little to you bit Eric, do a talk that?

Eric Gehringer

Sure.

that fact So the we're reaffirm million. we $XXX targeting did still

driver events about about of some them Regarding transitory us. the events, And I than of just I'll be actually we've reroute intentional normally your reducing train question different we with couple train had a a trains the they go. thinking transitory for about on the give one as large service before, you mentioned length would and example. is shared, some a a think and productivity of we've to path getting as temporarily, result length

be that could to consider certainly a headwind. So, you

are drive a a of the $XXX end to have team initiatives of with committed year. million still still the people here that number towards that whole You of different by

Chris Wetherbee

you. Thank Okay.

Operator

with Walter line proceed from question RBC. of questions. next your is coming Spracklin The Please the with

James McGarragle

Hey, environment, you all this the I'm taking pricing the this longer-term? on certainty for capacity? kind higher sustainable for questions. to how lock that morning. question Spracklin Walter going is of real increase want McGarragle. you to is Are Appreciate on it be you James my longer opportunity to with of My in was rates customers seeing believe

Kenny Rocker

next expect market it, corner talk be the afforded out happens think year. to this of some pretty long us, service will fact how and as dynamics now, it take the it along with in the year, Yeah, thanks us this has don't see product go on there. at environment least and the favorable pricing in there a has turn if inside the front prepared what strength that robust have What we pricing the withstand, out go and truck out I that. do I then throughout will that, I forecast we'll market. that clearly of we to But we stands that to think reliable would opportunity about the put I'm as is for some Eric

Lance Fritz

We're about that than gotten these service something sure we transformed and whole of a Kenny, the that an of on the miss miss we've issues transitory And to three, transformation. an performance opportunity instance, et back, rapidly, different And we four, improve performance, we reflections But that. five us of get has the the bridge fact expectation fundamentally some we we've ago. PSR shouldn't that. to years network, would issues We overall for to we the ‘XX, showed We've proud in you want I railroad cetera. that like call. important, from and don't PSR not But know of have the in us said and have our when improve talked it. kinds in we under make of ‘XX ballpark showed the difference our is

Kenny Rocker

today few the didn't we're beat recoverability, of when our they that a we years have have customers, respect Lance, ago. recoverability certainly talking we that to

Lance Fritz

Yeah.

James McGarragle

you. Thank

Operator

next The with Vernon from David question. proceed with Bernstein. the question is Please your line coming of

David Vernon

for thanks the time. guys, Hey,

of the around do other some the getting heard just environment? well, end put wanted we having inactive we that of that the resource issue demand even kind the teams up see the to actually get of labor add your people the the do about of environment? cost incentives that did might reach How one extent do rail? on in resources feel Kenny’s perspective disruptions. we I'd demand to love you ability little better a stronger from into there's there. actually staffing a We back a checkbook out use to better transitory off I some of a couple to if boards, that kind heard today we the convincing issues, the come friction come to railroad, maybe and of service bit. to the Lance, So word into dig here times sort to

Lance Fritz

question, great I and with resources. certainly And keep bringing a That's end better just to forces environment, up it volume we do a us David. more hope

jobs. data couple But issues Let's it are really learning that team the substantial now, workforce, hire We've LA we're our where sets, right like impediment. attract those actually to relatively labor, scientists to seeing our with hire when yet it's in a to a or labor. somewhere might core got most to it's and problems don't anything with comes spot an not we're have of where start we We to else. product, skill machine in But TE&Y, scientists. people of the do that's -- place a hiring special to not be harder try non-agreement than not this transportation think there different at like runs moment very

our attract Now, more a more at we've locomotive we taking pool somebody can attractive national shift job longer-term, for And the sure, the make capital where now, to ground, home really time, that stays that and we job and a do have that over makes negotiation got turns jobs initiatives so and includes them continue to of makes it our that jobs. into understand work. it It actually out to big right on on putting a attractive. think we our

that question. doing your more answers right of Other we We're kind to reroutes that network. actually because the the bringing out support think now power. about So locomotives assets, labor require

its network go those little back we're back to condition. and to Once able locomotives the into of storage. normal more get repair some going right those that's And thing. routing, and are operating are a those into a reroutes temporary But costly again, locomotives to get are done, to

little see get anything than it's don't international while, gets for going way. to going the a intermodal that just supply balanced. really demand until maybe and to issue other in That's looks I the last like So,

Jennifer Hamann

that, or engineering folks the just to was on still on are about add in to XXX going and larger we the furloughed, and Y-sides a I team XXX have mechanical number that side.

off or still first some our of draw And but kind our quite been to rate always I can. So that's now we folks XX% while, of is retention those extent a so. think, have for the

rate there. hit pretty still So, a good

David Vernon

intermodal new of in international Has the had terms things new intermodal opening I issues just follow-up, that. maybe sort up of of the dealing effect That's some in in should about facility a be there ability up great. like Is in from delay the knock you guys guess, Minnesota, ramp talked we facility the because temporal growth the sort with any impacted to LA? the that pop of as on services, terminal, that a expecting of you're new domestic up disruption international? story that

Kenny Rocker

very Kenny. been David, this is excited. We've

year. was XXnd, started been You that think have the units been small group there. in first look XX, I and Day call got the to We've growing. where rate We've with that. increase run Empire, the product. Investor started started seen see that our seen share the customers throughout a We and then in We Cities, the it more we've at up customers that's first attracted And volume we at January. true same on week the Inland of Twin it, June the that is

we encouraged not negative we’re fronts, the both and it seen on really have in a seen So, we anything impact that structural haven't aside of from call some light. wildfires,

David Vernon

you, Alright. guys. Thank

Operator

from Stephens. of question Long question. next with your the comes Justin line Please Our proceed with

Justin Long

how update quarters any Kenny, then And wins rail either two the year. thoughts competitors? progression on could from volumes influence a plan the get Thanks, of provide we trip and was you for of your new into I part could around back-half the in some Maybe if good or And morning. truckload business that your the Eric. compliance, wondering as ahead? question of

Eric Gehringer

start. So, I'll

we've continued those terminals, in the about metric. our to think every how the percentage in process then putting we of think a to talking the either east eight look to outage California bridge future, do in work done the do really about how online After mechanism dwelling to Justin combined in you work at see new understand increase what's is this stops that, train points ahead and of if of place avoid on and five opportunity, in TPC, we reduction, as So or new looking impact road, wildfires you're at as Northern there, the that we with variability up about that. us,

that we what to return critically us, our focused of team ahead work a of customers service ensuring very lots expect. the still on still So

Kenny Rocker

bit that Yeah. that to business moving secure the of able been a Thanks we've quite over Yeah, has for road. question. been

that seen You think the talked benefits of like We lumber Inland Twin been we've the Cities about there. encouraged some Empire the just products there. the we've about and and paper, and

things with have And the markets think that tremendous We've that got more Knight-Swift really one I services, management XXX come leadership might that team. miles. to then us we're have there. with been impressed excited the and seen year. shorter structure call pizza distances folks, lower some will business and uptick with really for this and about opened we're of an the were the of than cost up less it team, our their that we onto line opportunity see We next meet reliable

strong, forward we future. growth So to here to is of The and near-term in looking the and advantage it. the demand want we're take

Justin Long

the Thanks Okay. time. for

Lance Fritz

Thanks, Justin.

Operator

you. Thank

Cowen. Jason your question. next Our the with Seidl line question comes proceed from with of Please

Jason Seidl

to wanted bit I the shippers. talk a operator. with team. you, little Lance the conversations Thank Good and rest about morning, of

going As out the you're any Is guys I’ve the future on spotlight of to the are with starting I'm the had spoken we you contracts. look with to obviously, we to need shippers? get in are look same think but next And increased rail back executive How rails push believe, rates than think thinking going XXXX? they to the about to because that bring article this their have some into less regulations. clearly, future the order that Street which to that a just as some it us Wall worse renegotiate this the I think bringing about going think a guys up original some sort of here. potential in when discussions lot to higher spread was few does of to Journal inflation out change see trying to through, I we're we it think into you should going cost forward. even going

Lance Fritz

Lance. Jason, this is

about of at the about really then the some to Let we perspective on and me regulation, EO of the take talking the how relationship have a it. the team STB, maybe think stab and you're rest where first

a in bulk carbon So shipping own investing We baseline, in large their affordable help do railroads high that products perform And the jobs. you function our really people carbon We know of all their intensity economy. reduce infrastructure. in We for emissions. union provide paying and critical we volume. provide that

the to different think a the some of Department that the the all administration looked look looked number they their a of departments, EO when emphasize different the really functions. against would the with solution EO, needs current of lens the government that at perspective. be we're OMB, Transportation, So the we things that to their are things like through across There's And we EO Amtrak, freight in EPA, to trying help railroads. fight of accomplish of the initiatives

one reregulate urging the number we're what help to administration the some in they've So of is the all EO trying STB of of railroad. impact the understand got of inside the to terms

regulation, gas take the it on STB And industries impact them helping an been the with could to to continue off infrastructure. of own to of so, have to relieve retarding to little further, highways, instance, help for back trucks and in stepping railroad, ability, invest impact our doing multiplicity the And highway all we've that regulation their the a see ability reduce help and potential bring the footprints. and greenhouse our onto the

think work. for impacts and work it's says continued it's unique the don't years, be new get just got a of the set if when what think don't wrong. been they understand to I helping could they work this we've more years STB work, it It's doing regulate same do. the So I negative we've

Kenny Rocker

ask what our EO discussion, customers I time of will all business. of any of just haven't But time to have is, comments that from we the insert And Lance and add into try us seen mentioned. we we negotiations reflect to that think our customers we the that

Jason Seidl

compelling increase you color. thank for you and the some product, a of at it's I quick up comes some shippers, UP this. start clear one Can across the one as off visibility And clearly, to put well all I to road. follow-up trucks bottlenecks. the the look service Kenny, we're on always you what railroad I Kenny, supply Lance, One mean, of is when to thing that as shippers? into you some and improvement, But chain take to on the space. doing play. the seeing for railroad update also chain speak think supply us visibility

Kenny Rocker

what terms API of that call really We've our Yeah, so I'll been CIO too. Rahul our pretty overzealous in a Jalali, number has front. that on things. of been And for We've development sparked new aggressive customers.

bit our on from just for a utilizing is but line have We that an And not now. customers work not inner also what's also line, significant number value we're are APIs ports our doing we that with the so coming we pushing to see little fact about a inside a and intermodal focus. international talked even earlier what of of just can that I side, is rail on basis. them, the our the that that the it’s terminals key

a to that happen what's been part is to a happen proactive to working technology And want also visibility, if perspective is they something feedback operating there. make going have disruption want going other from we or The is that we've know sure there of customers also with next.

So, customers. providing the we're larger us really about about customers. good feel more we've room are the with as visibility and And share feel clearly, that the the the receiver. customers done that inserted, there's with we've for we for that that not We work sophisticated, good to

Lance Fritz

supply strategic issues a the us there's right more advance. international clearly, the be supply that More transparency, we've very probably in the in Jason, whole today across in chain. Yeah, of would front intermodal coordination addressing chain, got that's imperative

platforms, and portfolio take we to imperative it our care positioned our And there, it, see going so, we're with and an there's after product it. we're of

Jason Seidl

update, news, as Thanks great guys. always. for Appreciate sure. That's the

Operator

Bank. question Mehrotra Deutsche next line comes question. of Please Amit proceed The from your with with the

Amit Mehrotra

Hey, everybody. thanks,

So, in I a don't had ones. guys just where mentioned actually economy. couple freight is, I talked pricing, think obviously you There's the One the in about everywhere quick cycle. we are lot pricing but a inflation we

growth. place reflects helpful that? runway just from update the if be book be understand on the And seems is just coming business closely then, today on growth dynamics? can lot of and a the that, that of Kenny, I your current secular you it think us just to to what market And there's of how intermodal,

that I that do, I issue mentioned costs growth. is, than you think, The And you won trucking if revenue over there's company, with I acquisitions, dynamic the of rail can intermodal. balance know there's riding the wave example. that call to production be couple do a industrial mix going growth? there's that Knight-Swift aside you of the as kind But the one contract some out with years. There into trying that, headwinds extra the aside of proactively with drag other Thank through you for have? that's wave to can you do that to intermodal value lower better What some from well. next the as you that intensity, associated proactively with higher carloads particular come of are offset There's lean you. mixed it can of what from that other rails way, secular

Lance Fritz

Kenny, do all take of that? to you want

Jennifer Hamann

we part give the just focus like me Well, let touch. remind can in, I'll terms the what first what and in our of and to looks portfolio stats jump

at our or have tariff less and of that's or And assets basis. of annual XX% turning year deals. business. one primarily an So, XX% than But duration, then, about some that's kind about amount that's about in there's XX%, multi-year if portfolio, products the contracts spot you some on under is And then grain. and revenue we construction look our of

So, about think And then let sense in you cycle. I’ll of of think that and pricing portfolio kind you add. our Kenny,

Amit Mehrotra

end for XX%, year? year breakdown? the But the does or How rerate that the towards XX% of the the XX% is

Lance Fritz

Across the year.

Jennifer Hamann

year, the yeah. Across

Amit Mehrotra

you. Got

Okay.

Kenny Rocker

to the seen have acceleration business a that of those to The we that loop about growing feel year. the talked products is we We I we business for our the if think of do can of have customers. book able as All tremendous you throughout committed Yeah, tell playing a confident today. been business. about just from we you real touch. that able dray which over been we've lot the move long-term, network. in asked We about on that question industrial loading more larger that faster that amount quick. Jennifer trains we achieve than have within production, we that, we've We're to very areas price

something want are some do. the not also up that aggregating you with that we out whether We're team it our cement tracks to rock. it shipment someone it's of stickier added more the those more of for services continue bit that you and of asked and provide So We little there, cannot some make on to call whether wood providing to to build of it that chopping provide ourselves. little a customers call or a services. that earlier out visibility bit to move And

So, have continue that's do. something that to to do. we we something That's will that

have We just make to look not only like a railroad customer that the we sure but transportation logistics to a provider.

Amit Mehrotra

Got it.

it. Thank Okay. on Appreciate the Congrats you. results.

Operator

Please Radbourne The proceed TD next with the with question from your Securities. is Cherilyn of question. line

Cherilyn Radbourne

Thanks morning. much, very and good

in outlook comps QX for grain, QX. on grain grain as you and and the positive in highlighted typical grain still supply Just characterized But overall. question tight a your comments in products is

for more there? So, a color Thanks. hoping just bit

Kenny Rocker

the strong saying is It strong grain. that was for back-half demand of very I’m last is year. All

to And want very we above able pretty about maximize team, it. to and that's those the out working volume being comps we to going outlook have and a with But, that positive positive be are challenging. to all capture demand So, be Eric’s there. feel

Lance Fritz

like Yeah, to demand crop serve. starting pretty we going the to looks We're strong, that Kenny. over kind of shift to what's look

Cherilyn Radbourne

me. you. from all Thank That's

Operator

proceed next question. of comes from Vertical The question line Jeff Partners. with Kauffman your with Research Please the

Jeff Kauffman

about targeting you're Thank the did billion of implies the in $X the in which the congratulations. $X mentioned you billion year, second-half amazing. you the Jen, year, of And free question in year. you that and A on $X cash so that for billion is about very much, first-half

guidance if at volumes. I $XXX and extra. quarter or are operating give take that updated look the margins much, on by rising about not million a So profits But the

help more me you flow cash that's that generation could little what's of in So drive helping second-half understand a free year? the occurring the

Jennifer Hamann

to about talked billion related cash we when clarify, $X flow working to the share not that's just repurchases, generation. Jeff, Well,

Jeff Kauffman

okay. Oh,

Jennifer Hamann

using able you growth of know, balance EBITDA are And, be sheet share fund repurchases. we to and our our and some those to as

$X billion through I issuance. we So, debt that the May, funded referenced was in and did

growing. cash see do we So,

of that bit cash Cares were the are $X my free in Some that free cash have, the flow by But mentioned remarks, impacting billion relative Act I share and this more. little and to we that specific higher year-over-year did the some in impacted terms to the of comments flow taxes a the fall is on fact of repurchases.

Jeff Kauffman

just my Now I question. that get answers the math couldn't to work.

thank you. So

Operator

session. question-and-answer I'd closing Mr. comments. for to you. this the like Fritz back of end the turn time, floor we've Thank reached to And a At Lance

Lance Fritz

thank goodbye. and discuss to Rob, again everyone quarter you in our you, talking Thank Until with and then, I you looking for all forward We're questions. wish good October care to results. third Take your health.

Operator

concludes teleconference. This today's

You you lines time. may your participation. for Thank disconnect your this at

Union Pacific (UNP) 22 Jul 212021 Q2 Earnings call transcript