Union Pacific Corporation (UNP) Earnings Call Transcript & Summary

So the next part of Day 2 of our BofA, Industrials, Transportation & Airlines Key Leaders Conference. Certainly key leaders is definitely a [indiscernible] for our next panel. For those new to the room, I'm Ken Hoexter, BofA's airfrieght and surface transportation and marine shipping analyst. Next up, we welcome Union Pacific CEO, Jim Vena, his fourth time joining us here, CFO, Jen Hamann , for her third time presenting and many more attending from her IR role a decade ago, but I didn't have -- I didn't write those all down. So we could talk afterwards and you catch me up. They are joining the audience by Diana Prauner from Investor Relations. UNP has been kind enough to participate in 20 of the 24 years we've been hosting the event. We thank you for the commitment to the conference. Jim, so let me turn it over to you. It sounds like you've got some slides to get started with an update off to a strong start with volumes up 6.5%. It's well ahead of our 4% full quarter target. RTMs are up over 10%, so well ahead of our flat target. But in your run through, Jen, as you wrap up, if you could also include 3 key takeaways that you want us to leave with here today.

Okay. So of course, this is the cautionary information. I'll give you guys a second to read it. Of course, we're going to be present information. And if you want any more go on our website. But anything that we say I've got Diana in the room, if I say something that is a little more than what's public don't worry about is she'll have an 8-K out here in about 30 minutes. But I think I've been doing this for a while. I'm pretty comfortable on what we say. And we're talking about the things we've said publicly and talking about what we see at this point in time. And it's truly is a moving target at this point. But why don't we frame where we are because I think that's really important on who Union Pacific is and what we're trying to do. So fundamentally, what are we trying to do at Union Pacific, what's a win? And we talk about safety, service and operational excellence. And if we do those things well, then we drive growth because we know there's markets out there across the board, not just in intermodal and not just in trucks that we're absolutely sure that we can conquer win and bring more of it onto the railroad with the customers we have and new customers. So if you take a look at our service product, whether, how we measure, when I wake up in the morning, I look at a lot of operating metrics. It's a standard I do 7 days a week. It doesn't matter where I am in the world, what I'm doing. I look at those operating metrics. And we represent that a lot of it by telling -- saying how is our car velocity, and remember for people that don't follow us closely, car velocity is the best metric because it gives you from the time a customer releases the car until you place it and where they released it to. And that's a great measure to see how your fluidity is. So I use that as a reference and then you can break it up into the different. But just as important is, service, the way we describe it is what we sold to the customer, what we agreed to. And some of them are handshake deals and some of them are formal deals. But at the end of the day, it's what did we agree to, and then we measure against that. And to have both manifest and intermodal 95%-plus changes the entire paradigm about the relationship on whether we are doing the right thing for the customer. What's good is this is not a 1 week or 1 month or 1 quarter. We see this now for a number of quarters, probably since we put that measure together that we thought was the best example of how and which show how our service is. So the discussions with customers have changed. They talk about what we do moving forward and not so much about how well you're performing the service and what they're paying. And it's all about value. If we can present the value that Union Pacific provides them in faster car turns, where they're people that own their own cars or lease cars, dedicated service that they understand is going to arrive when we said it was going to arrive. And for the high requirement customers that we deliver exactly where they want in time. So we have a number of different things. I'm real proud of what the team has done. And I think it sets the foundation of what we do. You can see the efficiency whether it's a few more cars on every train now therefore, we can handle the ups and downs of what the normal business and normal week is in our business, but the team has done a fantastic job of building our train length against a very dynamic plan that we can change the plan quicker than we ever could before with some of the technology investments we've made. Workforce productivity, 9%. If -- I remember when I came back to work after my sabbatical for a couple of years away from Union Pacific, I was asked, is there anything left, 1 of the analysts, it wasn't you, Ken, you were very smart. You didn't ask me that question. And I wouldn't have come back if there was nothing to do. If I could put my feet up on the desk, I would have been doing other things. So you can see that we have line of sight to continue to improve productivity and continue to be able to make the railroad more efficient. And we do that with investing in technology, investing in our people, investing in our physical plant. So we continue to invest for the right things. And locomotive productivity is 1 of those 100 numbers that I look at every morning to tell us how the operation is, and that's headed the right way. Now a win is you need freight revenue and you need to be able to have a operating ratio that allows you to drive more of it to free cash flow, more net income and go up that operating income. And for me, I love that bottom number that free cash flow number at the end of the day. But as an industry, we've always looked at operating ratio, so if you take a look at the revenue growth, excluding fuel, I think we've done a fantastic job, and you see it in the numbers. We've outpaced what we said we have always wanted to outpace what the economy gives us. So I think we've done a fantastic job of being able to drive that in '24 and even in the first quarter of '25. Listen, I don't want to be a bragger, but all I could say about the operating ratio is, that's what we said we're going to do, and that's where we are, okay. And operating ratio is not what drives it -- I see some of you smile when they heard me say bragger, but let me go back again. Yes, I'm being a little bit of a bragger, so what, okay. At the end of the day, I think we have the team, we have the railroad. We have the physical plant. We're smart about how we move and we take decisive action in the right way. And I'm very comfortable where we are. I expect other people to take a run at us and probably sometimes beat us in operating ratio. This is not a game of who is operating ratio. It's about the fundamentals of what you do. So Jennifer, maybe I'll turn it over to you.

Sure. Thanks. So maybe I'll start off with our second quarter volume. So we commented back in April at our earnings release that the quarter was off to a strong start, that's continued for us. When you see the chart of the volumes on the upper right-hand side there, it really highlights what we think is a great strength of UP, and that's the diversity of our franchise. So we manage it across 3 business teams. We got total volumes, Ken, you mentioned this up 6%, really being [ leaded ] on the bulk side. So I think coal and grain industrial, that's kind of our mixed manifest type of business. It's a bit of a mixed bag. You've got some pressure on metals and minerals, forest products, but we're seeing strength in plastics and industrial chemicals. And then the premium side, that's where I'm sure we'll spend a little bit more time today. That's where we have our automotive as well as our intermodal and in particular, the international intermodal. Automotive is down, but our international intermodal is still up. Now you saw our quarterly -- or excuse me, our weekly volumes that we put out the other day, that did show that intermodal and this is both domestic and international was up only 3%, still up, still growing year-over-year, but we are starting to see that tail down as we're approaching that air pocket that people are talking about. Obviously, we got some good news on Monday in terms of a change in the tariff policy. So we'll see how quickly that supply chain can reverse itself and see some of that come back. The good news, going back to where Jim was at is the network is running really, really well today. And so we're in a very good spot to be able to react as that changes. But it's some of that uncertainty and that volatility, which is why, although we have been reiterating our long-term targets, we haven't given a lot of specific guidance in terms of 2025. And in terms of that not giving a specific EPS target for 2025 other than to say we will be able to achieve EPS growth that's going to help support us on that 3-year path. So still very grounded in that, very comfortable in those things that we can control that we're driving forward. The last thing I want to mention is that international trade and to look at what our total carloads look like in 2024 because again, it's very topical, almost 60% of our business is domestically linked. So I think U.S., as production grows in the U.S. as manufacturing grows in the U.S., we are extremely well positioned to capitalize on that. 14% is Canada and Mexico. That's mostly some of our bulk commodities as well as industrial, finished vehicles. And then the 30% is Asia and other. And so that does include China, the large bulk of that Asian and other is international intermodal business. And so the thing that I think is important to point out there is 30% volume does not equate 30% revenue. There's a very different revenue profile for international intermodal than international -- than the rest of our portfolio. In fact, we've said and we've been talking about this since last fall, when international really surged is that it's 40% to 45% below our system average. So you really need to be thoughtful. We've seen that on the way up in terms of the volume growth, you're also going to see that as volumes start to tail off a bit on the international intermodal side. So then, Ken, I'll just wrap up on the 3 key takeaways for us. I'd say it's the first thing that Jim talked about, the railroad is hitting it out of the park right now in terms of how it's operating, the service that we're providing and the productive way that we're doing that. To me, the second point is, is that we are shifting -- changing really the rail paradigm in terms of being able to both grow volumes and at the same time, improve our service product and improve our productivity. We're doing that quarter-over-quarter, that's building confidence with our customers. And that really leads us to the third part is that's going to support our ability to sustainably grow long term. And that's really what it's all about. We've got 3 mechanisms to drive profitability in our business, price, productivity, volume. We've got a long track record on those first 2, and now we're hitting the third one.

It's a great setup. Thank you. And I know I've got you on stage, but I'm going to start off with some of the minutiae stuff, right, just because it's exciting to think about what's driving this near-term I mean that bulk stands out, right, in terms of that growth level outstanding. So coal is up 36% in carloads, which was double our target intermodal up 11%. I can't believe we're still talking about coal all these years later, right? It's gone from 1/4 of volumes down to was down to 7% at the low for the industry back up to 9%. So we've seen that volatility kick in, and we thought we were done secular decline, and it's going to continue to fade away. But 36% increase is significant, right? And especially given what it can mean profitable wise. So what's driving the uptick? Is that just the Colorado contract? Or is there -- is this weather? Is there something more? Is it -- driving that.

Yes. So certainly, the contract win that you're referencing, Ken, is a big deal for us. We won that started really in the second quarter. That's 1 train a day incremental for us. So that's a big deal. And then natural gas prices have stayed relatively high, that's what most of our coal producers are competing against in the grid. And as those natural gas prices have stayed high, that makes the coal more competitive, and so we're seeing greater demand and then the railroad is running well. So we're cycling those cars and getting really good utilization.

And then intermodal, you talked about the air pocket. I want to understand kind of from your viewpoint, do you think this is pre-shipping. We've got the inventory here so we can get through this air pocket that we know for surety at least that it's a couple of weeks long. And then who knows what happens for 90 days? Do we get a preshipping rush and kind of boom. So maybe what are your thoughts? Jim, how do you prepare the rail for those kind of -- that kind of swing, and do you think this air pocket that Jen talked about, are we going to see a big pullback in intermodal for 3 weeks? And then instead of the mother of all returns of volume, if we preship, does it just kind of get back to a normal level?

I think you were just about answered the question yourself. So no [indiscernible] that receivers across the entire U.S. hold what they could forward. So some of that moved in the first quarter as soon as there was a discussion about tariffs, we're prepared. But of course, as we learned in -- after the pandemic, there's only so much capacity to pull forward once you fill the places, then what do you do? So I think that's there. That happened, and we would expect that to change how fast some of the buildup after the slowdown for the last couple of weeks once we have a different picture of where tariffs are. But for myself and for the Union Pacific, the way we look at it is we think that, yes, we had a little bit more business on the international front and a little bit because it translates to domestic. But we already are seeing the effect of what the people were loading 2 weeks ago or 3 weeks ago or shipping or buying versus what they had in stock pile. And so -- now the next few weeks will be if everything else stays normal, if the consumer doesn't change if the U.S. economy stays and is still have some strength in it, which everything that we see from what's happened to CPI and what consumer spend is that we should come out of this in the next few weeks, we should see an increase back in the amount of imports coming to the U.S.

Okay. So I would never have brought up the operating ratio. But since you put it on the slide, I guess I'll jump there with my next question. So Jen, thinking near term, right, because that's how we fly. But near term, 1Q to 2Q normal operating ratio improvement is about 270 basis points, which would indicate getting into the 58% range. You had unfavorable fuel and weather in the first quarter and given this unseasonable strength in volumes in 2Q. I think, Jim, you might have mentioned you could see a better-than-expected normal performance. So if things have improved further, what's the setup?

So I mean, I think you're right. It's a very favorable setup. Obviously, we're not going to give a guide for that other than we feel very good about how the operation is running. We're halfway through the quarter. I think the key is going to be what happens in the back half and how steep is the downfall in terms of the intermodal. And then do we see a snapback? And is that soon enough to influence the back half of the quarter, we'll just watch and see how that plays. I think the fact that we're running as well as we are is extremely important. And we'll see how volumes play out. I mean when you look at things historically, I think you get skewed sometimes because there are normal seasonal patterns, which are true. But this could be unusual. We had a very strong first quarter, 165,000, 7-day carloads. -- we'll see where the second quarter ends out. But regardless, I feel great about how the team is operating the fact that we're continuing to get strong core price, which is important in the first quarter, and we -- sure we'll talk about that some more. So feel good about our ability to perform.

So Jen, I think you ended with 1 of the kind of return to your long-term target, high single digit or double digit after a flat quarter in the first quarter shaping up for -- it could be double-digit growth in the second quarter. I presume -- do you think that's how the second half of the year flows out? And I guess I'm just trying to understand the contracts, the ebb and flows of traffic and what we think in terms of earnings?

Yes. Well, to be clear, I mean, we said we haven't given this precise target for 2025. We said it'll be consistent with us hitting our long-term targets. So with that, we'll see what happens in the back half. We knew we were going to have a difficult back half because of international intermodal and the strength that we had last year. So how did the tariffs impact that? Do you maybe get more of a surge that could be a benefit? What's the grain harvest look like? How does -- as Jim was talking about, how does the consumer stay engaged and what does that do from the industrial side of the business. So we like where we're at. I think we're in a great position. And we're going to move every piece of freight that's available to us and go out and win new business. That's an important part of what the team is doing as well.

I liked Jim keeps laughing when I keep asking these pinpointed questions.

I know...

Like you're going to change your mind and [indiscernible] giving the exact quarterly guidance.

Well, I'm waiting for Jennifer to break down 1 day, okay? I was going to say, okay, let's see what happens.

So Jim, the power of the rail just -- it keeps improving on the operating performance. That's what everybody was looking for when you returned to UP was what can you do? And so generating Jen, you mentioned 165,000 cars earlier this week, this year, I think you showed the network can handle 170,000, it wasn't what you wanted with -- in terms of international intermodal, in terms of boosting things, but it showed the power of the network can handle that growth. And I think it jumped, Jim, from when you joined maybe back down to 150,000, 155,000, if I remember back a couple quarters ago. So increased confidence in that scaling? Are we going to get -- do we break through the 170,000, just obviously economic-driven and a lot of things in there, but the capability of the network, as you've set it up.

We've had some weeks where we were 169,000, 170,000 and we handle that. The business mix makes a difference on what you're handling and what the impact is to the railroad. So -- but what I really like is what the entire team is doing, the operating team. And it takes more than the operating team. It's truly how the marketing and operations work to make sure that they understand what the impact is to the railroad and the type of business that you -- and what the price should be for the business and how it impacts the railroad. So that's really like a 3 stool, okay, that you're sitting on and you make sure that you do the right things. And the reason that's important is you can do something that's irresponsible from 1 piece of it and then drive the railroad not to be able to be efficient or you cause it. Little things like we'll store containers for you for $2 a day forever, right? Or we do something like that, that just doesn't make sense for the railroad. So we're clear-eyed what a win is. What clear-eyed is -- is this, is we have excess capacity. We have excess assets -- and we have excess on the people and the capability to ramp it up so that we can handle those things. Some of those items we can react fairly quickly to, Ken. We can react to locomotives very fast. We have 500 of them parked, ready to go. And every so often, we'll put a few of them in. But -- and so we're ready to handle more. The railroad itself is built to be able to handle substantially more than 170,000 railcars because customers as much as we love them because they pay the bills, they do not, okay? They did not tell us -- and this is not a negative. Some people when I say this, have said, "Oh, Vena, was surprised." No, we build the railroad for it, but we had a 30% increase in International Intermodal last year, and we handled it. So you've built the railroad that has some capacity to be able to flex, and that's what we've done. On the people side, we've been able to hire some of the issues that we had coming out of 2020 and 2021 where people had a problem hiring, we have not encountered that. So we're able to hire people in. We're in a good place, so that's how we run the railroad is -- those fundamentals make a difference. And productivity is like religion for us. We look at ways to be able to make the railroad more efficient. This year, we're able to switch more box cars per person hour than we did last year because of the way we've invested in our yards and technology. We'd be -- we're able to handle more cars on the same number of trains -- our train length because of the way we are able to flex our system differently than we did before. So those things add up to -- listen, I think 170,000 I won't even blink. 175,000, I think I'd still have a real good map, if I needed one. And 180,000, 190,000 I'd start to think about maybe I got to get really involved.

On that, you mentioned the 500 parked locomotives, right? So I'll throw on the CapEx, right? You've got your CapEx target of $3.4 billion. But does that -- if you start getting to 180,000, is that -- are you using the 500 stored? Or are you going out and buying new in advance of that? What's your tipping point for start? Or what are you doing now? Are you just doing mods now? Or are you doing news?

Yes. Listen, when it comes to assets in the asset, you have to decide whether something new is better than what you can -- you operate, more fuel efficient, better reliability -- and if you have to cross the bridge on that, and that's what you do, you go over and decide what you need. But when we are modernizing our locomotives, they come out like their brand-new locomotives. It's at a less -- not quite as expensive as buying new. So we found that we've been able to rebuild a number of locomotives, and we will continue to redo that. So they just come out of their brand-new locomotives, with the fuel side, with the reliability side. So that's the way we're looking at it. And the 500, we have another 1,000 parked that it would take us a little more than just 1 day to go out there and turn the key over to make them go from store to run. So the 500 are ready to go. They -- we fuel them up. We take them to the shop, fill them up with oil, fuel them up and they're gone. Well, we get another 1,000 that are parked somewhere in our system.

That's what I thought. I thought you had the 1,000 parked [indiscernible]. Yes, yes.

Yes.

So let's talk about employees. You threw out employees. You've got about 30,000 employees. I think you mentioned it might be down year-over-year. I don't know if that changes with your thoughts now on volume growth. But in answering this, let me make it an even longer question because that's what I do. This round of union negotiations has to be 1 of the strangest I think we've seen in a while, just because the industry broke up, right, in terms of you had CSX jump out go early. They just signed with the engineers on Friday, and you decided to be able to -- and then Norfolk and Burlington jumped on board, you said I want to try and get some work rule changes before I just signed upfront. So maybe just talk to us about what is going on in terms of the progress from your point of view with the unions while you answer the -- also the employee question.

Yes. Listen, talk about the unions. I'm not sure why anybody would give somebody else the responsibility to negotiate union contracts for our employees and work as a group. I can never figure that out. Because what you need to do is, first of all, I have a relationship with your employees. You have to have a relationship with the union leaders, and every railroad is collective agreement, or is a little bit different in what the requirements are. We understand that a pattern has been set by some of the other railroads. And that pattern is sort of a line that says what a deal, how you can find the deal. But there's things on Union Pacific that we see that we would like to tweak and they're not huge that would allow us to become more efficient and provide better service for our customers and especially on the service piece. So I've never been able to figure it out. I grew up working for Canadian National Railroad for 40 years, and we always negotiated our own contract. We never said, okay, why don't we get together because when you're together, you give up some of your rights about what is right and wrong. Now I wish some of the pattern deals would have waited a little bit because inflation has come down. Prices have stabilized but it is what it is. So you need to work on it. And we've already signed up 1 of the unions and it's been ratified. So that's a great step. And now do we have a lot of negotiations, Yes. We have meetings weekly with, I think, 17 different units with subunits in it, just for the conductors and locomotive engineers, they're broken up into 4 or 5 or 6 different general Chairman that we have to negotiate with to get it. So it's complicated. It is what it is. We're being very reasonable. We want a reasonable deal. We actually pay our employees more than any other railroad in North America on average. So there might be a little tweak here and there that somebody gets a little bit more on 1 of the other railroads. But overall -- so we don't mind compensating our employees. We want them to be productive but we also need the rules that allow us so that we don't get on a Saturday night where we can't go service a customer that pays us $150 million a year to go service them because we can't call a person that lives in the same community, but their contract rights tell them that they can only operate 1 way versus the other. How silly is that? So those are the tweaks that we want to fix. And the way we, and -- you got me going on this 1 here, Kenny. The way we've got to this place is as Union Pacific. I'm not going to talk about the industry. We decided it was easier for us to negotiate as a group instead of negotiating ourselves. I don't know about all of you, if I'm going to buy a house and getting a mortgage, I might like all of you in the room, but I'm not going together with you, okay? Because I think my -- I'm over 800. So I think I should get a better number than the rest of you in the freaking room, okay. So that's -- I'm not going to negotiate as a group, I negotiate for myself. Same thing on the railroad.

Do you agree with me? I like 800.

You want me to answer the headcount question. I was going to give you some product there. Since Jim joined our head count is down 7%, about 2,000 employees. And we're very much committed to being more than volume variable. You saw the workforce productivity number on this slide. We think there's more opportunity there, work safer work more productive, and we feel very comfortable with where we're at.

So the FRA seems to be issuing some waivers right now. They've had a lot of things on their docket for a long time, and now it seems like you can make some headway. What are the exciting things that is -- can be really additive. Obviously, I think you've got some automatic car inspection, track inspection. I mean there's things that Wabtec showed us on remote control, locomotive operations. What are the things that you become excited about reality near term, not 5 years out, but something you can start testing now and using?

I think the FRA today is looking at things in a very logical manner and they have the same goal as we do, and we have the same goal as them. We want to operate the safest railroad system in the world, and we are, okay? As an industry, we are the safest ground transportation system in North America. Nobody can move products as safe as we do on the ground. So at the end of it, I think for the longest time, it was just -- it took a long time for the review, the regulators to give us the authority to actually put technology that's been developed that helps us improve safety. Humans are very good at a lot of things, and you need humans to do things, but there is some of the autonomous track inspection systems that we have or signal inspection systems are way better and we've invested in them, and we're ready to go. So what I'm really happy about is the way the FRA is looking at it and saying, listen, We'll give you a waiver, go out there. And if their speed continues this way, Ken, it changes the paradigm and the way we look at the railroad and the capability that we have on the railroad instead of doing it the old way from 40 years ago. So I'm very happy with the way they're looking at it right now. I give them a lot of credit.

Are there -- is there anything you jumped in and started putting into practice because of that? I don't know if there was -- I think you were already testing kind of autonomous track inspection or car inspection. Is there anything else like the remote control or...

Yes. Listen, we're looking at a number of things the way locomotives are handled, remote operations and everything else. And the day we received the authority I think within 24 hours, we're starting. Okay. We're ready to go. So -- because some of these have been going on for a while.

Testing for a while.

So it's not like we'd have to wait forever.

Okay. Jen, you target $4 billion to $4.5 billion in share repurchases. You've accelerated the first quarter with $1.7 billion all in, including the ASR, accelerated share repurchase, how are you thinking about speeding up the buyback given where the stock is, given the volatility in the market?

Yes. So obviously, we think the stock is pretty attractively priced. In fact, and this was in our 10-K that we issued, we bought about $430 million worth of shares in the month of April. So continuing to invest, continuing to return cash. As you said, our target for the year is $4 billion to $4.5 billion. We're well on pace for that and feel very comfortable with that, generating strong cash and look to deploy that.

Thoughts on leverage at 2. 8%. Is that where you're comfortable debt-to-EBITDA?

I mean -- I'm less concerned about hitting a specific number at the end of every quarter, at the end of every year. It's really about maintaining a strong investment-grade credit rating overall, which we have, we're in good dialogue with our rating agencies. We want to have good access to the capital markets, and we're just -- we're very comfortable with where we're at.

Okay. Let's see. Long term, how should we think about rail volumes, right? We started off the conversation talking about getting to 170,000 a week. It seems to be, I don't know, maybe the last couple of quarters, the rails have finally gotten the mojo back, right? So it started growing again. I think we're at 6 quarters now of rail growth. Certainly, a lot of lost share coming out of the COVID opportunity there. But when you think about where the industry has been over, call it, a decade or so, and I get the coal declined, and lost all the coal, but what do you think about the rail industry ability to regain some share?

Okay. So let's see. I got 53 seconds. Let's see if we can do this justice. First of all, it's a network business that we have, the railroads. We hand off a lot of business to each other. So we need to make sure that we're all operating at a real high level. And I think we, as an industry, we are better today than we have been in a long time. That helps so that you can originate business. Second is, at Union Pacific, we're able to provide our customers with a high enough service level that they are looking at investing. So when we talk about 200 different options open, the customers are looking at what we're doing, those are people that want to come on the railroad. So we continue to do that for the future, and we continue to win with the business that we handle today, I think we grow. If coal drops 35%, 40%, it's pretty hard to make up that whole number, but I love the trend line, and I love where we are as an industry.

I hope we still have another 15 seconds. So Jen, I just want to revisit 1 thing you kind of mentioned, I forgot to kind of hit on this. You mentioned pricing was the strongest in 10 years in the first quarter. We heard a lot for years about pricing dollars, now it looks like you're talking about pricing percentage gains above cost, set me up at this stage.

No we're still talking price dollars above inflation.

Price dollars above inflation.

Absolutely.

Not percentage gain of pricing above percentage. So we'll just -- I'll open it up then just tell me about what is the pricing market, how are you viewing core pricing. We used to get from the rails for maybe a decade, the level of core pricing each quarter. Your thoughts -- so since we don't get that anymore, and there's fuel, there's mix, everything, Talk to us about how -- what's the environment underlying all there.

Yes. So the environment that's underpinning everything is the service product that we're providing to our customers and the value that they're seeing from us. And with that, Kenny and his team are out there able to have discussions with our customers about that value instead of talking about a service issue that frees up the conversation considerably as well as the capital investments that we're making. And so that's where we feel very confident our pricing is going to be accretive to our operating ratio. We're very confident about that. And you saw us start that in the fourth quarter of last year, did it again here in the first quarter. We hadn't catch-up because of the way inflation really picked up in, call it, 2022 and 2023, a time when we weren't providing this kind of a service product. And so we're now very much in a posture where we're absolutely confident that we're going to be able to get those price dollars above inflation dollars and above enough that it helps our margins and it becomes a tailwind.

All right. So we ran through a lot of issues this morning. I know we are out of time. So Jim, if I were to try to sum up and then look for you to add on what I'm missing. But one, bulk is up 12%, so great coal and intermodal volumes can decelerate with the air pocket, but still looking very strong on the volume side. Second, out of park on the service levels, as you quoted. Third, growing volume because of improved service. Forth, it sets you up for that long-term growth that Jen mentioned. Fifth, the operating ratio, you're going to outpace normal but maybe some variability given post the tariff changes. And sixth, employees will not grow in line with volumes, you'll still show some improvement there. Anything else you'd want to highlight that I might have missed in summing up.

No, listen, you did a great job but let me add 1 thing is when we wake up at Union Pacific every day, what we look at is how do we make the place better. How do we drive value for our customers so that it helps us when we go out to discuss price and how they can win in the marketplace. And if we provide those 2 things, which I think it's clear that we're providing today I think we take advantage of what the economy gives us, and we also go out and find things that add to what the economy gives us to be able to use this great network we have to be able to drive more volume and more revenue for this railroad and more to the bottom line. We understand who owns us and we understand there has to be a return for that investment but we look at things on a quarterly basis because we have to, but we also view things on what's going to happen next year and how we move ahead. So I'm very excited. Glad to be back at Union Pacific, great team. And Ken, thanks for hosting us this morning.

Thanks for joining us. Appreciate your time. Thank you.