Union Pacific Corporation (UNP)

“Even with that, though, we're still very confident that we're going to make margin improvement.”

“This deal will close, and it will close with limited impact just because it's an end-to-end.”

“Although we're confident we'll continue that productivity trend, we now expect full year compensation per employee to increase around 6%.”

“Obviously, the biggest opportunity for us will be as we enter into the next bid season, but we're pulling more containers out of the storage.”

“So as we're able to quote these new rates, as the private asset folks are able to quote new rates at IMCs, we are getting a little bit more price uplift as we move throughout the year.”

“We feel like when we look at what we see ahead for ourselves in terms of volume opportunity in terms of our continued gains from productivity and efficiency, we should be able to overcome the headwinds from the fuel.”

“And for automotive, we expect new business to offset market weakness.”

“International Intermodal will fully lap last year's tariff volatility in August, and we expect volume to be positive in the second half.”

“And wrapping up with premium, we expect domestic intermodal to continue to perform very well, supported by over-the-road conversions and our service product.”

“We expect continued strength in metals, well, from industrial development efforts and increased petrochemicals from customer wins like the startup of CP Chem that I mentioned last quarter.”

“Looking ahead on Slide 11. Grain and grain products is positioned for further second half growth driven by strong export demand, ongoing business development and new facility openings.”

“We also expect to continue delivering operating ratio improvement and maintain our position of industry leadership even against ongoing margin pressure from fuel.”

“Looking to the remainder of the year, we are raising our 2026 outlook to reported EPS growth in the high single-digit range as we continue to efficiently move increased volume on our network.”

“As we look then to the second half with domestic intermodal likely staying very strong and maybe some upside on the international side, we'll probably see a little bit more pressure on that mix side, but it's a great business.”

“A great example is the Golden Triangle Polymers Company joint venture with CPChem, where we are encouraged by the upcoming start-up of this new world scale facility in the third quarter.”

“we are still confident for the full year that we will be able to improve our operating ratio.”

“Beyond 2026, we remain committed to attaining our 3-year CAGR target of high single-digit to low double-digit EPS growth throughout 2027.”

“But let's start with the timing. Yes, we're working off of the timing that we know of that the STB has put out. So it will be second quarter next year, we would expect to be able to be at the place where they approve it, then we can move ahead.”

“In addition to that, we still invest between $500 million and $700 million a year in capacity projects.”

“While softer vehicle sales are expected to pressure automotive volumes, we expect business development wins will offset some of the impact.”

“Wrapping up with premium. International intermodal volumes will remain subdued, although we lapped some of the shifts we experienced last year as we moved through the quarter.”

“We expect the strong volume and construction and petrochemicals to continue based on our customer wins.”

“For grain products, we expect continued strength driven by business development and expanding renewable fuels and feedstock markets with a clear renewable fuels policy, providing more stable demand.”

“In grain, improving export demand to China, along with continued momentum into Mexico, positions the business well to support growth.”

“Looking ahead, we are affirming our 2026 outlook. This includes our expectations for reported earnings per share of mid-single-digit growth and operating ratio improvement.”

“We continue to expect full year compensation per employee to increase between 4% and 5%, as we work to offset cost inflation with process and technology improvements.”

“Our original diesel fuel estimate of $2.35 per gallon established in January is now much harder to predict as we have seen quite a bit of volatility recently. And all the fuel prices seem to be coming down for the month of April, we will likely average over $4 per gallon.”

“We'd like to see that sustain a little bit more from a timing perspective. We'd like to see the sustained tightening of the truck market. ... if those sustain, then you're right, we should see a little bit more uplift on the volume there.”

“with a lot of the quarter in front of us, basically two months left, I think we'll make that up and really just be left with a little bit of extra cost from the cleanup.”

“I mean, it's going to add a little bit of cost to us, and that's really cleanup cost, little crew delay, limos, lodging, those types of things.”

“we wake up Thursday morning, we should be back.”

“I'm very comfortable that we're going to be able to improve our OR this year.”

“Importantly, we fully expect to improve our operating ratio versus 2025 and remain the industry leader in operating ratio and return on invested capital.”

“we remain committed to attaining our three year CAGR of high single to low double digit EPS growth through 2027.”

“we do plan to outperform the markets.”

“We are looking to grow our business that's what we're going to do in 2026.”

“we don't think that we're going to get any help from price.”

“we do not expect a significant change to the timeline as we are still targeting closing in the 2027.”

“We are planning $3.3 billion for 2026 capital improvements and we will continue to deliver value to our shareholders with consistent annual dividend increases.”

“Our commitment to yielding price dollars that exceed inflation dollars has not changed but price may not be a driver of our improving margins in 2026.”

“We expect slightly over 4% inflation in 2026.”

“Softening vehicle sales will pressure automotive volumes That said, team continues to hustle and recent business development wins will help offset some of that softness.”

“On the domestic side, we see continued opportunity and growth from over the road conversions enabled by our strong service product and multiple channels to win.”

“We expect our petrochemicals markets to remain strong driven by investments we've made in our Gulf Coast franchise and winning with new and existing customers.”

“In Grain Products, we expect continued strength supported by aggressive business development and expanding markets for renewable fuels and feedstocks.”

“In 2026, we expect our cash balances to steadily grow as we first prioritize paying off the $1.5 billion of long term debt that comes due in the first half of the year and then conserve cash in anticipation of the merger closing.”

“if we're right in the mid single digits for 2026, that puts a big lift on 2027 for us.”

“Grain exports, mostly to Mexico and some to China, coupled with ongoing business development, should support growth.”

“We're very confident that the vote will come in to support this. There's no reason shareholders will have any problem with it.”

“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.”

“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.”

“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.”

“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 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.”

“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.”

“We also anticipate solid performance in the metals and minerals markets, where our team is laser focused on business development to outperform the market.”

“We're positioned to finish strong in our petrochemicals market.”

“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.”

“For the fourth quarter, volumes are currently running down 6% as international intermodal volumes reflect the tough comparison against last year's strong growth.”

“As we close out 2025, we expect our cash balance to steadily grow with our strong cash generation.”

“we expect full year compensation per employee and up around 3%, which is consistent with the increase we've seen year-to-date.”

“We also are reaffirming our view on accretive pricing, industry-leading operating ratio and return on invested capital.”

“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.”

“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 want to win market share, for sure, stand-alone until we have the approval mid next year, hopefully, of the merger.”

“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 in terms of how we think about OR, obviously, Jim has talked about that, that's an outcome of all the efforts that we're putting forward. But our challenge and our task as a management team is to make continuous improvement. And so we feel very confident in our ability to continue to drive improvement as we move through the back half of the year.”

“We're going to introduce a 7-day a week service from Tacoma into Chicago. We're going to introduce a 7-day a week service from Memphis to Dallas.”

“Certainly, that's not going to repeat itself as you're thinking sequentially second quarter to third quarter.”

“Further, we reaffirm our view on accretive pricing, industry-leading operating ratio and ROIC.”

“Specific to 2025, EPS growth will be consistent with attaining our 3-year EPS CAGR view of high single to low double-digit growth.”

“We think for us, it's probably cash, $250 million to $300 million incremental on an annual basis.”

“And you mentioned price/mix, so yes, as we look at the back half of the year, we do actually think, assuming our belief is correct, which I think it is in terms of what's going to happen with international intermodal as a part of our business mix, we should see that mix piece turn more positive as we move through the second half.”

“Certainly, we expect from our coal business to be up significantly.”

“In fact, we're expecting some sequential declines through the back half.”

“Wrapping up with Premium, as Jennifer indicated, strong comparisons and port shifts will challenge international and domestic intermodal volumes.”

“Additionally, we anticipate petroleum volume to remain challenged due to business shifts and our commitment to balance volume at the right margins.”

“We anticipate stable performance in the metals and minerals markets.”

“Starting with Bulk, we expect coal volumes to significantly exceed last year's levels, driven by current forecast for natural gas prices through the remainder of 2025 and the new volume with LCRA.”

“Additionally, other income will look more like first quarter results as a result of lower expected real estate gains.”

“Looking out to the remainder of 2025 on Slide 7, we expect third quarter other revenue to be in line with our second quarter results due to continued softness in the autos market and lower accessorials.”

“We would expect a similar level of increase in compensation per employee for the full year as we continue to leverage process improvements and technology to offset wage increases.”

“We are not we are not going to come off of our how we do it. How do we deliver that high single-digit, low double-digit? Absolutely.”

“What we look at at this point in time, we're very comfortable that we're standing by our guidance that we provided last year.”

“So thanks for that question. So off to a really strong start here in 2025. You know, our guide for the year in terms of share repurchases was $4 billion to $4.5 billion.”

“We laid out in January that we expected for the full year our comp per employee cost per employee to be up 4%. ... At this point, we would stick with the 4%.”

“As the market or if the market does improve we expect to move in a more positive direction on the revenue per car side.”

“Well, Ken, I love the question. You know that you were trying you asked me because you thought for sure Jennifer would say I don't give any guidance. But yes, we're historically we're going to historically see that improvement at this point.”

“However, we remain optimistic about growth driven by over-the-road conversions because of our strong service product and multiple channels to win.”

“And we expect decreased volume in the second half of the year due to the higher comparisons as customers diversify back to East Coast and Canadian ports.”

“On the intermodal side, we anticipate a slowdown in international intermodal as we move through the second quarter.”

“Our industrial chemicals and plastics markets will remain favorable based on customer plant expansions and our ability to win incremental volume in the market.”

“Moving to industrial, we anticipate petroleum volume to remain challenged due to business shift and our commitment to balance the volume at the right margin.”

“Lastly, we expect grain exports into Mexico to remain strong.”

“Similarly, our views on accretive pricing, industry-leading operating ratio, and ROIC as well as capital deployment plans still hold.”

“In particular, 2025 EPS growth will be consistent with attaining our three-year EPS CAGR view of high single to low double-digit growth.”

“We think if everything comes to a normal, much more normal situation, I think we will deliver that and we're very comfortable that we have the opportunity to do that.”

“There's more than 75 initiatives up against how we think about driving productivity across this company. And I really do mean across the company... I'm very confident about our plan in '25, and I'm encouraged that we'll be telling you about those results as we go through '25.”

“I'm not going to parse out the quarters in 2025, but I don't see us taking a step back and we're going to be accretive throughout 2025.”

“I'm proud of the commercial team. They continue to hustle and we will maintain our strong pricing posture in 2025.”

“the credo here for the management team is we're going to have volume outpace the markets and we expect the revenue to outpace volume.”

“In 2025, we are targeting capital spending of roughly $3.4 billion, flat versus last year.”

“We remain committed to our industry leading dividend payout ratio of around 45% of earnings and we plan to return excess cash to shareholders through share repurchases of $4 billion to $4.5 billion during the year.”

“Finally, with the capital allocation, as you heard from Eric, this year, we plan to invest $3.4 billion back into the railroad.”

“We also acknowledge there are some tough spots, namely from reduced coal demand and the year-over-year international intermodal comparison we'll face in the second half of 2025 as today's mix impact turns into a volume challenge.”

“In fact, we currently have over 200 track construction projects in progress with a potential revenue of $1.5 billion, and our business development pipeline is just as strong as it was this time last year.”

“Overall, we anticipate a soft economic environment and face difficult comps in 2025, but I'm excited about onboarding LCRA, the new coal customer mentioned earlier, and I'm encouraged by the incremental volume we will gain from new and expanding facilities across multiple business segments.”

“Strong international intermodal volume experienced in 2024 creates tough year-over-year comparisons for us. And the mix issue continues as international volumes remain strong at the start of the year.”

“Moving on to industrial, while the forecast for industrial production in 2025 remains muted, our diverse business mix, strong service and robust franchise will help us grow in some markets.”

“We expect coal demand will be met from existing high inventory levels.”

“bringing the current count of UP accessible plants to 15 with more expected this year.”

“The important point really is going forward, and we talked about this at Investor Day, is that not only will we continue to have our price dollars exceed our inflation dollars that it will become accretive to our margins next year.”

“When we look at all the areas of expense and on the capital side, we have areas to improve our productivity and we have action plans against that for the rest of this year and going into 2025 and beyond.”

“We're sticking to our guidance for next year, which I think that's it. We've set it out, we thought about it. It's very, very definitive about what we want to deliver next year. So unless the economy implodes in the United States, we're very comfortable that it's that we're going to be able to deliver that.”

“We are absolutely online to set operating ratio improvement at the Union Pacific.”

“We will be the best margin operating ratio company this year and I don't see any reason for us not to continue that and we will look at ways.”

“We're going to see the strongest volume year since 2029.”

“We continue to generate strong pricing and productivity, positioning us well to finish 2024 with momentum and on a path to achieve the long-term targets we laid out last month.”

“We will purchase $1.5 billion of shares and invest roughly $3.4 billion of capital and our capital allocation strategy is unchanged.”

“Pricing dollars will exceed our inflation dollars.”

“I expect in short order that, that intermodal speed will turn the other way and that will continue to add on top of the excellent performance we have already.”

“We believe the mix pressures are going to continue into the fourth quarter.”

“We'd expect what you're seeing in the public numbers, those volumes to continue through the rest of the year.”

“In Automotive, we are seeing softness in the market, which will be partially offset by business development wins.”

“On the intermodal side, the surge of West Coast import volumes will continue to drive for both our international and domestic markets for the remainder of the year.”

“Petrochemicals is expected to outperform the market, based on the strength of our Gulf Coast franchise, and we are excited to see incremental volume from Shintech's expansion at Plaquemines, Louisiana.”

“As we mentioned earlier, we expect the rock market will not match last year's record volume.”

“Additionally, we expect continued growth in the grain products tied to renewable fuels and their associated feedstocks.”

“At this time, we'd expect fourth quarter results to closely mirror the third quarter, while improving on a year-over-year basis.”

“For petroleum, we have tougher comps but are building on our success with business development.”

“I think we built our capital plan. We always build it from bottom up to see what we need to do and we’re very comfortable with the $3.4 billion that we have this year and we don’t see any substantial difference in our capital plan moving forward.”

“the technology that we’re implementing, the speed that we’re going to be able to change our plan and what we’re doing moving forward will help us to be able to even on a flat volume be able to improve our efficiency.”

“We are highly confident in our ability to generate price dollars in excess of inflation dollars and still expect freight revenue to pace ahead of volume in 2024.”

“We don’t intend to add any leverage this year.”

“That inflation, I would say, is still probably running around that 5% level that we talked to coming into the year.”

“Coming into the year, we said that we thought our full-year inflation would be around 5% or so. I think we’re probably tracking pretty close to that.”

“And for automotive, we’re still expecting year-over-year growth due to business development wins despite some softening in the market.”

“And, wrapping up with Premium, on the intermodal side, we expect to see continued strength for imports in the near-term.”

“However, both petroleum and petrochemical markets will remain favorable due to our focus on business development supported by our investments in the Gulf Coast.”

“We expect our rock market will not match last year’s record volume.”

“In addition, we expect grain products to remain positive as we see incremental renewable diesel production coming online in California and continue to capture new business.”

“With share repurchases, we expect to repurchase around $1.5 billion in 2024 as we maintain our current leverage.”

“Going forward, this transfer will lower both other revenue and our expenses by roughly $15 million a quarter.”

“We are though exceeding, just the dollars are exceeding the inflation dollars. We're still very confident of that.”

“But efficiency-wise, if you look at how the number of cars we're switching for employee and everything that we're doing with technology, I'm very comfortable that we'll figure out a way to change that slope on that line on what it costs us and the number of people per car to be able to hand the business level that we're at.”

“Now I want to be really clear right off the bat. We have the capacity to be able to handle more than 155,000 carloads.”

“In addition, as evidenced by our first quarter results, we will continue to generate productivity that improves our network efficiency.”

“For Automotive, we will see continued strength due to our business development wins and improved OEM production.”

“We have a wage increase coming July 1. That's a headwind.”

“In summary, coal and domestic intermodal will put pressure on our volumes this year, but the team has taken action.”

“On the domestic intermodal side, we continue to see market softness, but expect our strong service products and diversified set of IMC and private asset partners will set us up well when demand returns.”

“And finally, for Premium, on the intermodal side, we expect to see consistent, strong West Coast imports in the near term, but it's still too early to predict what will happen in the back half of the year.”

“However, we expect petroleum and petrochem markets to remain favorable due to our focus on business development, supported by our investments in the Gulf Coast and operational excellence.”

“Lastly, we are optimistic about grain products, as we continue to see growth in biofuel feedstocks.”

“but it will not happen in 2024.”

“But it's a 2024 headwind for us that we are going to overcome just like we did in the fourth quarter.”

“But I'm excited. I think we overcome this year, by the end of the year, we'll see ourselves in a different position.”

“We're confident that regardless of the demand environment, we will take the necessary actions to run a more efficient network.”

“And growth within biofuels continues to be driven by strong demand outlook, combined with a heavy focus on capturing new business, including incremental volume secured from Minnesota and Iowa origins.”

“We don't expect that to continue because it's not indicative of our safety performance... looking forward to a better footing in 2024.”

“In the - in 2024, we have dates of implementation for the agreements that we have not implemented completely. And those are pressures on the number of people that we would need to operate.”

“I think there's more on the railroad to become more efficient.”

“I think there's more available for us on the efficiency side from how we operate our trains, the fluidity and the terminals, how we use our people, and we did a really good job. The team did a fantastic job in the fourth quarter, and I expect it to get better as we go through the year.”

“The bulk of that will still be working through in 2024.”

“Finally, as Jennifer laid out, our productivity and pricing gains will be key to overcoming ongoing inflationary pressures in 2024 as well as the soft economy.”

“With those pressures, we do not expect price to be accretive to margins in this year.”

“On top of the macro pressures, lower coal demand and some lost international intermodal business are expected to negatively impact our volume.”

“And finally, for premium on the international intermodal side, we expect the market to improve year-over-year, but a contract we lost earlier in 2023 will negatively impact our 2024 volumes.”

“However, we foresee the petroleum and petrochem market remaining favorable due to our focus on business development.”

“If you looked at the bottom line, we have enough locomotives that we would not have to look in the planning period of 3 years out that we would have to purchase any locomotives.”

“For the second half, we are well prepared to handle the demand if the market and economy improves.”

“On the domestic side, we are staying close with our customers who have indicated that they'll see a soft start to the year.”

“Domestic grain is relatively stable, but we are keeping a watchful eye on export demand.”

“On headcount, absolutely, we're going to use attrition to rightsize the company as much as we can to what we know now, we've identified where we want to get to.”

“Yes. But Jim, I do think it's safe to say, once we have those deals implemented and we're working to drive the productivity. Our long-term view is that we can grow volumes faster than we grow headcount.”

“So it won't be quite as large. It won't be the $1.3 billion that we did last time, but there is productivity gain that we can do.”

“So there will be labor inflation pressures.”

“But we're going to operate as efficiently as we can. And we do think we have an opportunity to have sequential gains going from third quarter to fourth quarter on the OR basis.”

“In addition, we expect automotive growth to continue, driven by strong OEM production and elevated shippable ground count.”

“However, we expect petroleum and construction markets to remain favorable due to our focus on business development.”

“Lastly, our forecast for renewable biofuel feedstock continues to remain strong.”

“Starting with bulk, we anticipate continued challenges in coal as natural gas futures remain volatile.”

“Finally, our capital plan is coming in a little bit higher at $3.7 billion.”

“We expect similar levels for fourth quarter paid sick leave expense to third quarter and the impact of the BLET work rest agreements will primarily be seen through elevated force levels.”

“And significant inflation headwinds remain primarily in the form of the new labor agreements.”

“And that assumes fuel prices in the fourth quarter are around $3.30 a gallon.”

“Fuel also remains a headwind on earnings per share, although moderating from the $0.34 negative EPS impact in the third quarter to approximately $0.10 of negative year-over-year impact in the fourth quarter.”

“We do, however, still expect to generate pricing dollars in excess of inflation dollars.”

“We're facing a demand environment where we don't expect full year volumes to exceed industrial production.”

“As a result, we now expect full year cost per employee to be up closer to 3%.”

“The short answer, Brian, is we are confident that we can continue to price above inflation.”

“Offsetting that, we get a tailwind from implementing the brake person agreement. And as we implement the work rest schedule, I am confident that generates both productivity and service product improvement. The issue is timing and magnitude.”

“So we feel very good. There's full confidence and price and above inflation in making sure we cover those costs.”

“Unchanged is our expectation to generate pricing dollars in excess of inflation dollars.”

“That's how you should be thinking about it.”

“Yes. Just a short answer. No, we're not expecting increased pricing pressures on that intermodal side of the house.”

“Yes. I think the differentiation there is sequential versus year-over-year, and year-over-year is going to continue to see some pressure. Sequential, we've seen as much pressure as we're going to see.”

“So it really depends on how you see the rest of the year playing out in terms of how that's going to look. But if you just compare last year's nat gas prices to where we're at this year, that tells you there's going to be some ongoing pressure there.”

“So we are not -- with the addition of the labor expenses, volumes moving away from us and then obviously, some fuel headwinds relative to OR in the back half of the year, we don't expect year-over-year improvement.”

“That same OEM will be bringing on business in the first quarter.”

“We're going to land another facility here by the end of the year.”

“And then fuel is going to be a real headwind in the back half.”

“So Justin, I think as we look into the back half of this year, improving productivity, the hiring pipeline tones down a little bit, but we're still hiring. It probably looks like year-over-year about equal, I think, is what Jennifer was saying.”

“So I think you can think about that as being something that will carry over and repeat itself in the first half of 2024.”

“When we look into the third and fourth quarter, Eric outlined some of it in his prepared comments, but we are not yet volume-variable with what we're seeing in the marketplace. We took a step towards that in the second quarter. We got to keep taking steps in the third and fourth.”

“We think as you look to the back half of the year, it's probably going to be, I'll call it, flattish or so from where we're at right now.”

“However, we have paused share repurchases and don't expect to be back in the market for the remainder of 2023.”

“We also plan to maintain our current dividend of $1.30 per quarter as reflected in our dividend announcement this morning.”

“Our capital plan remains $3.6 billion.”

“And while we certainly expect better availability, better service and more flexibility with our crew boards, providing more access to time off likely adds employees and expense.”

“For this year, we estimate the work rest implementation will cost upwards of $20 million.”

“Our expected payback period is roughly two years as it allows us to redeploy crew personnel, save on costly borrow-out positions as well as reduce our current hiring needs.”

“Our current forecast is that they will add roughly $50 million to labor expense in the second half of 2023, which is reflected in the cost per crew numbers I quoted earlier.”

“Assuming fuel prices remain relatively stable, this will likely represent a negative second half impact of around $0.50 per share.”

“As it relates to fuel prices, I should point out that the tailwind we've experienced these past 24 months is now expected to shift to a headwind both on the operating ratio and EPS front.”

“Although we still expect to outpace industrial production in certain markets, weak demand for consumer goods has pushed our full year volume outlook below current industrial production estimates, which are slightly positive.”

“Excluding the impact of the onetime bonus payment, cost per employee increased 5% in the second quarter, and we expect it to be up 3% to 4% for the full year.”

“When fully implemented, our current forecast is an additional 400 to 600 employees.”

“For automotive, we expect growth to continue driven by strong OEM production and high shippable ground count.”

“However, on the international side, we continue to outpace U.S. West Coast import market as customers shift more business to IPI.”

“However, we expect to see continued strength in construction with new business wins.”

“Demand for forest products will also remain below 2022 levels.”

“In addition, we expect our forecast for biofuel shipments of renewable diesel and their associated feedstocks to remain strong.”

“We expect near-term grain shipment to be challenged with tighter U.S. grain supply impacting volumes.”

“It should be. I mean, obviously, watch natural gas prices.”

“However, with improved operations and recent rain improving new crop supply forecast, we remain optimistic about our opportunity to move incremental grain carloads in the fourth quarter.”

“I'm going to resist the temptation to give you 2Q guidance and stick with the full year guidance. But you all can do the math. I mean we have to make improvement quickly, and it's got to be sequential. And at some point, obviously, that has to be year-over-year, and that is our focus. And that is our intent, and we're very confident that we will do that.”

“What I would reinforce is that based on the performance that we see on the railroad right now, it's bringing me and others greater and greater confidence that we'll see that productivity continue to grow throughout the rest of the year.”

“And so we feel quite confident that we will be able to reach that goal as it relates to volumes and the rest of our full year guidance, obviously, which we reiterated.”

“Net-net, in the second quarter, you're going to see us add to the active TE&Y headcount coming out of the training pipeline.”

“What gives us a ton of confidence as we look into the year is how the network is operating right now. It's in a place where we can get the volume and we can squeeze out the excess cost.”

“I am confident that the team's relentless focus on business development will drive volumes to exceed industrial production this year.”

“Our diverse portfolio allows us to maintain our pricing guidance.”

“We've got a fair amount of inflation that's in front of us that we got to offset this year and going into next year. So we're going to be fighting that battle through the whole year as well.”

“As we look at what our current prices are for fuel right now, call it $3 a gallon when we paid $4 a gallon a year ago, that's going to flip on us.”

“Now having said all that, looking forward to the rest of the year, hey, we're still bullish about some of these markets that I mentioned, whether it's finished vehicles, the metal, rock that's in our construction area is one and then biofuels.”

“Yes. Chris, so let's just start off. You look at our coal, we're expecting it to have a seasonal lull this time, the shoulder months that I mentioned.”

“Our longer-term guidance remains in place, and that is we fully expect to be volume variable and have ultimately our head count grow at less than our volume numbers are growing.”

“Particularly right now, you saw the 1.9 points that it benefited our OR in the first quarter. That will -- comparison will get a little tougher in the back half.”

“Our plans for capital allocation also are unchanged.”

“Wrapping up on Slide 19, we are maintaining our 2023 full year guidance to achieve volumes above industrial production, price gains in excess of inflation and operating ratio improvement.”

“Assuming we are able to reach agreements across the board, we would expect cost per employee to be up mid-single digits for the year, consistent with what we discussed in January.”

“In the second quarter, the team is focused on moving more freight and rightsizing the fleet.”

“In addition, we expect automotive growth to continue, driven by strong OEM production and dealer inventory replenishment.”

“And finally, for Premium, we expect near-term challenges in the intermodal market from high inventory levels, inflationary pressures and weak consumer spending as people shift back to spend more towards services than goods.”

“However, we expect to see continued strength in construction and metal with new business wins.”

“Lastly, we expect biofuel shipments of renewable diesel and their associated feedstocks to grow due to solid market demand, new production coming online and business development wins.”

“Starting with our bulk commodities, we expect grain to be challenged near term as export demand softens and supply tightens throughout this crop year.”

“However, as we look ahead towards the next crop season in late fall, we're encouraged by the initial forecast.”

“We feel good about being able to move coal in these natural gas prices and even the forward curve for the rest of the year.”

“we are confident that although it is going to lag a bit, we are confident that our price will -- price dollars will exceed inflation dollars.”

“But Kenny, you are also remaining confident that as we put our plan together, all that included, we are still -- we see a clear path for pricing ahead of inflation.”

“With 430 modernized locomotives currently in the fleet, we will bring the total modernized to over 1,000 by the end of 2025.”

“In terms of hiring for the year, I think, we have said it would be similar probably to 2022 levels.”

“For 2023, we are expecting to have a negative mix for the year and really it’s pretty simple when you think about it with increased Intermodal shipments with the onboarding of Schneider.”

“As the supply chain has healed, as we are seeing a little bit of softness in that Intermodal market, we have seen accessorials come down a bit. They were down a little bit for us here in the fourth quarter and that would probably be my expectation going into 2023 as well.”

“We look to further translate these gains into better derailment performance in the upcoming year.”

“With our balance sheet currently leveraged at the desired levels, the amount of cash available for repurchases will be less than in prior years and predominantly funded from cash generation.”

“The remainder of our capital allocation plans remain unchanged, rewarding our owners with an industry-leading dividend payout of around 45% and returning excess cash through share repurchases.”

“Turning to capital allocation, we continue to make significant investments into our business with an expected 6% increase in capital investments versus 2022 to $3.6 billion.”

“Assuming current fuel prices and our thoughts on volume, productivity and price, we expect to improve our full year 2023 operating ratio on a year-over-year basis.”

“In addition, as we have demonstrated consistently, we expect to generate pricing dollars that exceed inflation dollars in 2023.”

“Finally, we expect our 2023 annual effective tax rate to be around 24%.”

“Depreciation expense should be up around 3% versus 2022 and below the line, similar to last year, we expect other income to remain elevated versus historic levels driven by higher real estate and interest income.”

“While the projected increase from last year, we expect capital spending to remain in line with our long-term guidance of less than 15% of revenue.”

“We are targeting 2023 capital spending of $3.6 billion, pending final approval by our Board of Directors.”

“With current freight car velocity around 210 miles per day and trip plan compliance measures demonstrating sequential improvement, we look to maintain that progress as volumes strengthen into 2023.”

“We look to leverage these gains to improve derailment performance in 2023.”

“We expect automotive growth to be another bright spot in this segment driven by production strength and inventory replenishment.”

“We expect to outperform that market, however, through our new business with Schneider, as well as opportunities to grow with other private asset owners and our strong IMC partners.”

“In addition, we expect biofuel shipments for renewable diesel to continue to grow due to solid market demand, new production facilities coming online and business development wins.”

“Again, we do expect that they could be less year-over-year, but I don’t see that as a significant driver for us.”

“Yes, Ravi. Short answer, yes. Longer answer, there are a lot of moving parts. There are going to be some headwinds into next year. Inflation is quite real. But as we look at rolling up a budget and starting or really at the tail end of putting our plan together for sure, we are confident we can get pricing above inflation.”

“But we have those headwinds. And as you know, with those inflationary things, in particular, while we're very confident we're going to offset that with price, there is some timing there.”

“Ultimately, I remain confident that we're going to get our temporary agreements ratified and be able to avoid a strike. That's still a possibility, but I don't think it's a probability.”

“Setting these headwinds aside, we are confident that we will yield price dollars that exceed inflation dollars even with a higher inflationary hurdle than expected at the start of the year.”

“Entering the fourth quarter, as we continue to improve train speed and other measures, locomotive productivity will continue to strengthen as well.”

“But as you heard us talk today, where we will look to end out would be something less than that because we know there's inefficiencies in that and that we're working to squeeze that out.”

“And again, I think we got to point this out. We are performing best at the top of the heap amongst our peers today, and I think we're going to repeat that again next year in terms of growth.”

“We're set up well to exceed what the industry is going to do. We're doing that this year. I think we're going to do that again next year, and we're going to have to make hay with it.”

“We're going to have to overcome that with price, and we anticipate we will.”

“As we do that, there is, for sure, an opportunity to take excess cost out of the network. Now having said that, we're fighting against pretty significant inflation.”

“Looking into 2023, we've made it clear we've got another large private asset customer coming on base, which is a positive for us.”

“We expect our international intermodal business to be up in the fourth quarter.”

“We think there's a path to do that without a substantial or kind of meaningful impact on overall headcount requirement because what we're trying to do is we're trying to make availability of employees flat across the week, right?”

“But David, I think it's important to remember, and Eric said this, we still expect that we can be volume variable even with those agreements. So we're going to see volumes exceed whichever -- what happens in the economy, you won't see headcount grow to the same extent.”

“So kind of putting all those things together cumulatively on a sequential basis, we are expecting the operating ratio to deteriorate some even as we're bringing more volume on and still working to take costs out of the network.”

“That flips back to a headwind of a decent amount, we think, now in the fourth quarter.”

“We're going to bring on two new plants here in the next, call it, three to six months, which is very encouraging for us.”

“We now expect our reported full year operating ratio to be around 60%.”

“As you heard from Kenny, however, markets are softening a bit, and that is resulting in a slight reduction in our overall volume expectations, now more in the range of 3% growth for full year 2022.”

“Although we repurchased shares at a strong pace in the third quarter and expect that to continue for the remainder of the year, we have been impacted by higher-than-anticipated inflationary pressures and service costs.”

“Related to share repurchases, we now expect to buy back roughly $6.5 billion in 2022.”

“With the increased capital spending to date, we now expect full year 2022 capital to be around $3.4 billion, up slightly from our prior guidance, but well within our overall guidance of less than 15% of revenue.”

“For the fourth quarter, we expect other expense to be flat versus 2021 as we are anticipating the receipt of an insurance settlement for last year's bridge fire.”

“For the fourth quarter, we expect the year-over-year increase to be around 7%, in line with tentative and ratified wage increases.”

“As a result of those changes, we now expect our full year tax rate to be around 23%.”

“We now anticipate completing an additional four sidings in 2022 on top of the 20 sidings in our original plan.”

“Crew availability continues to improve, which will help us capture more growth and support our business development wins as we head into 2023.”

“Overall, we still foresee a favorable demand environment for the fourth quarter.”

“And we expect growth in Automotive to be driven by improving supply for parts and inventory replenishment.”

“We're also watching the international markets closely, but we expect to be positive in the fourth quarter due to easier comps.”

“We expect parcel and truckload demand to remain soft as consumer preferences have shifted more to experiences versus goods.”

“However, we expect construction to be a positive due to strong project demand in the south.”

“We expect biofuel shipments for renewable diesel to continue to grow due to solid market demand and business development wins.”

“While we'll probably have borrow outs for a while as we're working to catch up in some of these hard-to-hire areas, we would hope to be in a position to certainly slim that down and then ultimately eliminate that as well as be able to manage the overtime better.”

“But that was what we were intending to communicate is we can still get to a 55, but we're not going to be able to snapback into that range we don't believe in 2023.”

“I should also mention relative to yields in the back half, we are expecting a little bit more of a negative mix impact in the back half as we see those international and domestic intermodal loadings to pick up relative to some of the rest of the business group”

“So we are watching that, it hasn’t changed much, I would say here in the first half, but would look for some improvement in the back half.”

“So it’s just hard to say, Ben. We have been really trying to parse that out ourselves. And so far, we think that if the U.S. economy slows down, let’s say, it is slowing down. I think our markets are going to be in a place where we are still going to have growth opportunity.”