Union Pacific Raises Capital Spending to $3.5 Billion, Maintains Earnings Outlook
Key Facts
Union Pacific raised its 2026 capital spending plan to $3.5 billion while maintaining its forecast for high-single-digit growth in reported earnings per share, according to its third-quarter results announcement issued on October 22. The company thus combined an increase in its investment allocation for the year with an unchanged earnings growth outlook announced alongside its second-quarter results. The previous spending plan was $3.3 billion, a level the company reaffirmed in its July earnings release. In that release, the company raised its forecast for reported earnings per share growth to the high-single-digit range, before reaffirming that estimate in its latest announcement. The spending plan update accompanied results showing year-on-year growth in operating revenue, freight volumes and earnings per share.
Reported diluted earnings per share in the third quarter of 2026 were about $3.49, up 16% year on year, according to the company's statement. Adjusted diluted earnings per share were $3.53 for the same period, up 15% from the corresponding quarter a year earlier. The annual increase in the reported measure exceeded that of the adjusted measure, while adjusted earnings per share were higher than reported earnings per share. By comparison, the company posted reported net income of $1.79 billion in the third quarter of 2025, according to Associated Press coverage of those results. Reported earnings per share at the time were $3.01, the comparison base for this year's third-quarter result.
On the operating front, operating revenue rose 15% year on year to $7.2 billion in the third quarter of 2026, according to the earnings statement. Revenue-generating freight volumes grew 6% year on year, with expanding freight traffic accompanying the revenue increase during the period. Details in the earnings presentation showed intermodal shipments were among the businesses supporting volume growth, alongside metals and energy shipments. Specialized freight and grain also contributed to the increase, adding contributions from multiple freight categories to the quarter's performance. The company said in its presentation, however, that "lower coal shipments partially offset growth," with the decline in that category limiting gains in other businesses.
On liquidity, Union Pacific generated $8.3 billion in cash flow from operations during the first nine months of 2026, according to its third-quarter earnings presentation. Actual capital investment over the same period totaled $2.8 billion, representing spending from the start of the year through the end of the quarter. Alongside that investment, the company repaid $1.5 billion in debt during the first nine months, according to the presentation. Free cash flow, as defined by the company, was $2.4 billion from the start of the year through the end of the third quarter. The ratio of adjusted debt to adjusted earnings before interest, taxes, depreciation and amortization stood at 2.4 times at quarter-end, among the debt metrics the company reported.
Against the backdrop of these operating developments, Union Pacific and Norfolk Southern are continuing the review process for their merger before the Surface Transportation Board, according to a joint update the companies issued in September. They said the board unanimously rejected requests by opponents of the deal to dismiss the amended merger application. The decision allowed the review process to continue, while completion of the transaction remains subject to the board's review and approval. On medium-term financial targets, Union Pacific had announced a target for a 3-year compound annual growth rate in earnings per share ranging from high single digits to low double digits through 2027. On the merger's timing, the companies said in their September update that they expected completion during the second half of 2027, with regulatory approval remaining a condition for closing the deal.