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UNP Strong on Dividends & Buybacks Amid Freight Weakness
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Key Takeaways
Union Pacific faces freight volume weakness from soft consumer demand and lower fuel surcharge revenues.
UNP is cutting costs with longer trains and efficiency gains, while returning billions to shareholders.
An $85B Norfolk Southern merger may create a $250B rail giant with $2.75B in annual synergies.
Union Pacific Corporation (UNP - Free Report) is suffering as e-commerce sales have normalized and consumer markets have softened. Geopolitical uncertainty and high inflation continue to hurt consumer sentiment. Reduced fuel-surcharge revenues are also concerning. Due to these headwinds, volumes remain weak.
The operating ratio (operating expenses as a percentage of revenues) remains under pressure due to revenue woes. Given the soft freight market scenario, the revenue weakness is likely to persist. To combat the revenue weakness, UNP is looking to cut costs. To improve efficiency, UNP is using longer trains and boosting freight car velocity. Due to these cost-cutting efforts, operating expenses declined 3% year over year in 2024.
UNP Intends to Boost Shareholders’ Wealth
UNP is focused on rewarding its shareholders. A strong free cash flow supports shareholder-friendly activities at Union Pacific. The free cash flow in 2023 was $1.54 billion. That same year, the company returned $3.9 billion to its shareholders. The company hiked its dividend twice in 2021. In May 2022, UNP raised its quarterly dividend 10% to $1.30 per share. In July 2024, UNP increased its dividend by a further 3% to $1.34 per share. The latest shareholder-friendly move came in July 2025, when UNP increased its quarterly dividend to $1.38 per share. The company has paid out dividends on its common stock for 126 consecutive years, reflecting its pro-shareholder approach. In the first half of 2025, it returned $4.3 billion to its shareholders through dividends ($1.6 billion) and buybacks ($2.7 billion).
UNP’s Impending NSC Buyout Looks Promising
In July, UNP inked a deal to buy Norfolk Southern Corporation (NSC - Free Report) in a stock and cash transaction. The deal, approved by the board of directors of both companies, is expected to close by early 2027. The transaction is expected to be accretive to Union Pacific’s adjusted EPS in the second full year after closing and deliver high single-digit growth thereafter.
In the event of the merger materializing, the combined entity will seamlessly connect more than 50,000 route miles across 43 states from the East Coast to the West Coast, linking approximately 100 ports and nearly every corner of North America. The deal will be closely scrutinized by antitrust regulators before materializing. However, the pro-business stance of the current administration may help the deal go through. Investors will closely watch for further updates on this burning issue.
Valued at $85 billion, the combined enterprise will exceed $250 billion and is expected to generate $2.75 billion in annualized synergies. The merger aims to enhance freight competitiveness, improve transit times, expand intermodal services, reduce highway congestion and preserve union jobs.
SMART-TD, the largest U.S. railroad union and Union Pacific Railroad have secured a historic agreement guaranteeing lifetime job protection for SMART-TD members in train and yardmaster roles amid Union Pacific’s proposed merger with Norfolk Southern. The agreement prevents involuntary furloughs, ensures preferential hiring for affected employees and promotes joint implementation, providing stability for workers and minimizing disruption to shippers.
Other expansion-related updates in the Zacks Transportation - Rail industry include the association between Canadian National Railway (CNI - Free Report) and CSX Corporation (CSX - Free Report) . The two railroads have signed a Memorandum of Understanding to launch a intermodal rail service into Nashville, TN, to strengthen freight connectivity across North America. This initiative builds on their successful East Coast partnership and demonstrates Canadian National and CSX’s commitment to creating value for customers, communities and the broader logistics network.
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UNP Strong on Dividends & Buybacks Amid Freight Weakness
Key Takeaways
Union Pacific Corporation (UNP - Free Report) is suffering as e-commerce sales have normalized and consumer markets have softened. Geopolitical uncertainty and high inflation continue to hurt consumer sentiment. Reduced fuel-surcharge revenues are also concerning. Due to these headwinds, volumes remain weak.
The operating ratio (operating expenses as a percentage of revenues) remains under pressure due to revenue woes. Given the soft freight market scenario, the revenue weakness is likely to persist. To combat the revenue weakness, UNP is looking to cut costs. To improve efficiency, UNP is using longer trains and boosting freight car velocity. Due to these cost-cutting efforts, operating expenses declined 3% year over year in 2024.
UNP Intends to Boost Shareholders’ Wealth
UNP is focused on rewarding its shareholders. A strong free cash flow supports shareholder-friendly activities at Union Pacific. The free cash flow in 2023 was $1.54 billion. That same year, the company returned $3.9 billion to its shareholders. The company hiked its dividend twice in 2021. In May 2022, UNP raised its quarterly dividend 10% to $1.30 per share. In July 2024, UNP increased its dividend by a further 3% to $1.34 per share. The latest shareholder-friendly move came in July 2025, when UNP increased its quarterly dividend to $1.38 per share. The company has paid out dividends on its common stock for 126 consecutive years, reflecting its pro-shareholder approach. In the first half of 2025, it returned $4.3 billion to its shareholders through dividends ($1.6 billion) and buybacks ($2.7 billion).
UNP’s Impending NSC Buyout Looks Promising
In July, UNP inked a deal to buy Norfolk Southern Corporation (NSC - Free Report) in a stock and cash transaction. The deal, approved by the board of directors of both companies, is expected to close by early 2027. The transaction is expected to be accretive to Union Pacific’s adjusted EPS in the second full year after closing and deliver high single-digit growth thereafter.
In the event of the merger materializing, the combined entity will seamlessly connect more than 50,000 route miles across 43 states from the East Coast to the West Coast, linking approximately 100 ports and nearly every corner of North America. The deal will be closely scrutinized by antitrust regulators before materializing. However, the pro-business stance of the current administration may help the deal go through. Investors will closely watch for further updates on this burning issue.
Valued at $85 billion, the combined enterprise will exceed $250 billion and is expected to generate $2.75 billion in annualized synergies. The merger aims to enhance freight competitiveness, improve transit times, expand intermodal services, reduce highway congestion and preserve union jobs.
SMART-TD, the largest U.S. railroad union and Union Pacific Railroad have secured a historic agreement guaranteeing lifetime job protection for SMART-TD members in train and yardmaster roles amid Union Pacific’s proposed merger with Norfolk Southern. The agreement prevents involuntary furloughs, ensures preferential hiring for affected employees and promotes joint implementation, providing stability for workers and minimizing disruption to shippers.
Other expansion-related updates in the Zacks Transportation - Rail industry include the association between Canadian National Railway (CNI - Free Report) and CSX Corporation (CSX - Free Report) . The two railroads have signed a Memorandum of Understanding to launch a intermodal rail service into Nashville, TN, to strengthen freight connectivity across North America. This initiative builds on their successful East Coast partnership and demonstrates Canadian National and CSX’s commitment to creating value for customers, communities and the broader logistics network.