Executive Summary
Union Pacific Corporation (0R2E.L) reported QQ3 2025 results that reflect a stable, high-margin railroad operator with solid year-over-year profitability but notable near-term liquidity and leverage considerations. For the quarter ended September 30, 2025, UP posted Revenue of $6.244 billion, Gross Profit of $2.901 billion, Operating Income of $2.549 billion, and Net Income of $1.789 billion, delivering EPS of $3.02. The company’s EBITDA reached $3.263 billion, yielding an EBITDA margin of approximately 52.3% and an operating margin of roughly 40.8%, underscoring durable profitability in a mature freight environment.
Year-over-year comparisons show constructive momentum: Revenue +2.5% YoY, Gross Profit +4.7% YoY, Operating Income +5.8% YoY, Net Income +7.0% YoY, and EPS +9.8% YoY. However, QoQ movements were mixed, with Net Income down about 4.7% and EPS down ~4.4% versus Q2 2025, while Revenue rose about 1.5% QoQ. These dynamics suggest ongoing volume discipline and favorable pricing offset by quarter-to-quarter seasonality or working capital effects.
A key caveat is the near-term liquidity and leverage profile. Current ratio stands at 0.748 and the quick ratio 0.598 (current assets relative to current liabilities), indicating tighter near-term liquidity despite strong margins. Debt metrics remain elevated (Debt to Capitalization ~0.653; Long-Term Debt to Capitalization ~0.636) with an interest coverage of about 7.8x. Operating cash flow per share is negative at -$7.69 and free cash flow per share is -$4.76, suggesting substantial capex intensity or working capital outflows in QQ3 2025. The dividend payout ratio is 45.8%, reflecting a balanced but capex-absorbent capital allocation approach. Valuation remains elevated with a P/E of ~19.6x and a P/B of ~8.1x; however, free-cash-flow negative metrics temperance the sustainability of buybacks or deleveraging in the near term.
Given the data, UP presents a resilient profitability profile in a stable freight environment, offset by a cautious liquidity and capitalization stance. Investors should monitor cash flow generation, capex discipline, debt maturity profile, and potential productivity gains from network optimization and intermodal growth to form a balanced longer-term view.