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Greetings. Welcome to Union Pacific's Fourth Quarter 2024 Earnings Conference Call. As a reminder, this conference is being recorded, and the slides for today's presentation are available on Union Pacific's website. At this time, it's my pleasure to introduce your host, Mr. Jim Vena, Chief Executive Officer for Union Pacific. Thank you, Mr. Vena, you may now begin.

Thank you very much, Rob, and good morning, everyone. Pleased to have you with us this morning. A little bit of winter in some parts of our company, even lots of snow in the southeast part, but I love the way the operating team has worked through it, and we are in way better shape already. So great recovery by everybody, but lots of hard work by the men and women of Union Pacific. But why don't we get started?

So I'm joined here this morning in Omaha by Chief Financial Officer, Jennifer Hamann; our Executive Vice President of Marketing and Sales, Kenny Rocker; and our Executive Vice President of Operations, Eric Ger. Let's dig into 2024.

It was a very successful year for the Union Pacific team, and we really finished the year on a high note in the fourth quarter to put up an adjusted 58% operating ratio, removing the impact of a new regional brakeperson agreement is really excellent work. It shows that the team is executing our strategy to lead the industry in safety, service and operational excellence.

Now why don't we move over to discuss the fourth quarter results, starting on Slide 3. This morning, Union Pacific reported 2024 fourth quarter net income of $1.8 billion and earnings per share of $2.91, both 7% improvements. Fourth quarter revenue, excluding the impact of fuel surcharge, grew 4%. Our ability to generate strong volume growth and core pricing gains more than offset an unfavorable business mix.

Reported expenses year-over-year improved 4%, while lower fuel prices led the way, the team demonstrated strong productivity, utilizing 3% fewer employees to move 5% more volume. This led to operating income growth of 5% and the operating ratio outcome that I mentioned earlier. This is the result of the team's commitment to build a safer, more durable and more efficient network. Just a fantastic way to end 2024.

Throughout the year, we built momentum behind our strategy, and you see that in the financial results we delivered. While internally, we've already turned the page to work on further improvements in 2025, we need to pause and celebrate the team's success in 2024. We set a goal to achieve industry-leading results. And when the dust settles, I'm confident that's where we'll be.

So with that, I'll let the team walk you through the quarter and the year in more detail and then come back for a wrap-up before we go to Q&A. We'll start with the fourth quarter and full year financials. Jennifer, it's all yours.

All right. Thank you, Jim, and good morning, everyone. Let's begin with our fourth quarter income statement on Slide 5.

Operating revenue of $6.1 billion decreased 1% versus 2023 against strong volume growth, while our fourth quarter freight revenue finished flat at $5.8 billion. Breaking down the drivers of freight revenue, increased volume in the quarter added 525 basis points. Fuel surcharge revenue of $588 million declined $207 million as lower year-over-year fuel prices reduced freight revenue 450 basis points.

Similar to our third quarter results, strong core pricing gains were more than offset by business mix, reducing freight revenue 100 basis points with our 16% intermodal growth driving that mix dynamic. Of significance, our price dollars met the long-term commitment of exceeding inflation dollars while also being accretive to fourth quarter operating ratio. Wrapping up the top line, other revenue decreased 7% as a result of lower accessorial revenue from the second quarter intermodal equipment sale and reduced revenue from the ongoing transfer of Metro operations.

As a reminder, we see offsets against this revenue decline in operating expense. Switching to expenses, our appendix slides provide more detail. But let me share some highlights of our strong cost control as total operating expense declined 4% to $3.6 billion against a 5% increase in quarterly volume. Looking closer at the expense line, Compensation and benefits expense increased 8% compared to fourth quarter 2023, driven by the $40 million break person buyout agreement, which Jim mentioned and wage inflation. This is the second break person agreement that we have reached in the last couple of years both of which have enabled more efficient car handling.

Quarterly workforce levels decreased 3%. Our train service employee workforce was flat against the 5% volume growth as we effectively handle the additional volume. All other workforce areas decreased 4%. These efforts resulted in record workforce productivity, demonstrating our strategic focus on delivering operational excellence. For 2025, we expect our all-in cost per employee to be around 4% as we continue to find ways to be more productive with our workforce through process improvements, technology and investment.

Fuel expense decreased 23% on a 24% year-over-year falloff in fuel prices from $3.16 to $2.41 per gallon. Our fuel consumption rate improved 1% in the quarter as we more than offset the impact of moving a less fuel-efficient business mix. Equipment and other rents expense increased 8% due to inflation and volume-related growth in our Intermodal business. Finally, other expense declined 22%.

As you'll recall, in the fourth quarter of 2023, we highlighted elevated casualty costs due to the catch-up of case backlogs. In the fourth quarter of 2024, we benefited from lower casualty expenses as well as a reduction in bad debt expense. Operating income improved 5% to $2.5 billion and was a fourth quarter record. Below the line, other income decreased $40 million on lower real estate gains, while interest expense declined 6% or $19 million as a result of lower average debt levels. Altogether, these results total a record fourth quarter net income of $1.8 billion and earnings per share of $2.91, both up 7% versus 2023.

Our fourth quarter operating ratio of 58.7% improved 220 basis points year-over-year. And as Jim noted, when you adjust for the break person agreement, our quarterly OR came in at 58%, and a great outcome, reflecting very strong quarterly performance by the UP team as we work to safely and efficiently serve our customers.

Moving to Slide 6. Let me quickly recap full year 2024. Operating revenue of $24.3 billion grew 1% on a 3% volume increase, core pricing gains, partially offset by lower fuel surcharge revenue and business mix. Excluding fuel surcharge, our freight revenue grew 4% versus 2023. Operating income totaled $9.7 billion, a 7% increase and our full year operating ratio of 59.9%, improved 240 basis points, both great indicators of how good railroading produces solid operating leverage and cost control. Earnings per share of $11.09 increased 6% versus 2023, while our return on invested capital improved 30 basis points to 15.8%.

Let's turn then to shareholder returns on the balance sheet on Slide 7. Full year 2024 cash from operations totaled $9.3 billion, up almost $1 billion from 2023. Our cash flow conversion rate improved to 87% and free cash flow increased from $1.5 billion to $2.8 billion. These year-over-year improvements reflect the change in year-over-year labor agreement payments as well as the growth in our operating income.

We rewarded our shareholders, returning $4.7 billion in 2024 through dividends and share repurchases. Our adjusted debt-to-EBITDA ratio finished the year at 2.7x as we maintain a strong balance sheet and continue to be A rated by our 3 credit agencies. 2024 proves that our strategy of safety, service and operational excellence, leading to growth also generate strong cash returns for our shareholders.

With that, let me turn it over to Kenny.

Thank you, Jennifer, and good morning. As Jennifer mentioned, we had a strong fourth quarter. Freight revenues totaled $5.8 billion for the quarter, which was up 4% excluding fuel surcharges due to increased volume. This also reflected strong core pricing gains as a result of our deliberate focus on maximizing price. Let's jump right in and talk about the key drivers for each of our business groups.

Starting with our bulk segment, revenue for the quarter was down 4% compared to last year, on a 4% decrease in volume, while average revenue per car remained flat even with decreased fuel surcharges. Coal continued to experience the same challenges seen throughout the year, demand remained soft due to high inventory levels and the competition from low natural gas prices. Grain volumes increased for the quarter as there was strength in export grain to Mexico, coupled with UP service during -- strong UP service during the harvest. Lastly, grain products grew in the fourth quarter as our work to locate renewable diesel plants on our railroad, it's paying dividends in the form of increased demand for feedstocks, and we expect that growth to continue with the startup of two new facilities, one in Nebraska and one in Kansas that came online in the fourth quarter, bringing the current count of UP assessable plants to 15, with more expected this year.

Turning to Industrial. Revenue was up 1% for the quarter as volume remained flat. Strong core pricing gains were mostly offset by lower fuel surcharges and a negative mix in volume. Business development in our petrochemical and petroleum commodity segments drove growth. Demand improved for plastics -- for our plastics business in both export and domestic markets. However, these gains were offset by softer demand for metals, sand and rock.

Premium revenue for the quarter was up 3% on a 13% increase in volume and a 9% decrease in average revenue per car, reflecting increased intermodal shipments and lower fuel surcharges. Intermodal volumes remained strong due to international West Coast import demand and positive domestic growth driven by business development efforts. International volumes were up 26% in the quarter, outpacing the growth rate of the West Coast imports by utilizing our buffer resources, which includes people, locomotives and railcars, our operating team efficiently move the traffic and maintain fluidity in the supply chain. Automotive volumes were flat due to unplanned downtime, partially offset by business development wins with both [ Volkswagon ] and General Motors.

Now let's focus on 2025. Here are some of the key macroeconomic indicators that we're watching this year on Slide 10. These are S&P Global's forecast from their January report. And you'll notice that it shows a mixed picture for 2025, which is not materially different than what we shared back in September at our Investor Day in Dallas.

The forecast for industrial production shows a slight increase, while GDP growth slows from 2024. Housing starts are expected to remain challenged, but with December sharp uptick, we are closely watching the situation.

Now turning to Slide 11. Here is Union Pacific's 2025 outlook as we see it today for the key markets we serve. Starting with bulk, we anticipate coal to continue to decline, though not to the levels we've seen in 2024. We expect coal demand will be met from existing high inventory levels. However, a new contract win with [indiscernible] Colorado River Authority, also known as LCRA, will help offset losses from 2025 co-retirements.

While it's premature to predict grain export demand, domestic demand is expected to remain steady through the first half of 2025, driven by strong grain yields from a good harvest in 2024 as well as our efforts to serve both new and expanding facilities. Lastly, we expect continued strength in grain products, driven by intense business development and the expanding markets for renewable fuels and the associated feedstocks. We will continue to monitor potential changes in renewable depot incentives and tax credits.

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. The metals market is expected to remain soft. However, our industrial chemicals and plastics markets will remain favorable based on plant expansions with multiple strategic customers and our strong focus on business development. This strong focus is all about unleashing what's possible by empowering the commercial team. They are leveraging our Gulf Coast franchise and strong service to win.

And wrapping up with premium on the intermodal side, we expect growth in domestic intermodal with over-the-road conversions. Strong international intermodal volume experienced in 2024 creates tough year-over-year comparison for us. And the mix issue continues as international volumes remain strong at the start of the year. Additionally, we are keeping a watchful eye on potential tariff changes that could further impact volumes.

Even though we are early in the year, we are seeing automotive OEM curtail production to better manage high inventory. However, consistent with S&P Global's outlook and our conversations with customers, we expect a positive trend with output increasing as the year progresses. 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.

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. We continue to invest in intermodal, which Eric will touch on. You heard me discuss new unit train facilities added to our network, and we are bullish on industrial development projects in the Gulf Coast, with a mix of large and small customers. I'm proud of the commercial team. They continue to hustle and we will maintain our strong pricing posture in 2025.

And with that, I'll turn it over to Eric to review our operational performance.

Thank you, Kenny, and good morning. Moving to Slide 13. Before diving into our results, I want to express my appreciation to the team for their hard work. Historically, vast surges in volumes, such as those we witnessed in 2024, significantly disrupt rail operations. However, the team bucked that trend and was able to improve our service product, while also driving growth and network efficiency. It's proof our relentless focus on operational excellence is working, and I'm excited we are carrying that momentum into 2025.

Safety also improved in 2024 and continues to be at the forefront of everything we do. For the year, both our derailment and personal injury rates improved significantly, a strong step towards becoming the safest railroad. We remain committed as well to enhancing safety as we strive to send every employee home safe each day.

Moving to our results this quarter. Freight car velocity improved 1% versus last year, a favorable business mix, coupled with continued improvements in terminal dwell drove the performance. Notably, 2024 marked an all-time record for terminal dwell, a meaningful improvement in our service, which reduces customers' fleet costs through improved cycle types. Exceptional work by the team is they continue our focus on the fundamentals to drive terminal fluidity and capacity for future growth.

On the service front. Our intermodal service performance index declined 7 points year-over-year, while manifest improved 5 points. Intermodal SPI specifically improved month-by-month through the quarter as December ended with our second highest level of the year at 97%. The team continued to deploy buffer resources and adjust trip plans to minimize the impact of the quarter's 26% surge in international intermodal shipments.

Now let's review our key efficiency metrics on Slide 14. Our full year locomotive productivity metric improved 5% versus 2023, while the deployment of buffer resources to handle higher volume levels drove a 3% decline in our fourth quarter results. Workforce productivity, which includes all employees, improved 6% in both the fourth quarter and full year versus 2023. Further, 2024 marked a fourth quarter and full year record for workforce productivity. We continue to remove unneeded work and automate operations while improving the safety of how we work.

[ Train length ] improved 1% versus 2023, marking our sixth consecutive quarter year-over-year improvement. All in, 2024 set an all-time record for [ train link ]. We have made great strides in this area. However, there are still opportunities to adjust the transportation plan and leverage targeted investments as we push to generate mainline capacity in the pursuit of growth.

To wrap up, let's review our capital outlook for 2025 on Slide 15. In 2024, we invested approximately $3.4 billion across the railroad as we continue to reduce capital intensity while still delivering value to our shareholders. In 2025, we are targeting capital spending of roughly $3.4 billion, flat versus last year. As always, our first capital dollars will support safe and productive operations as we invest in our infrastructure, and renew older assets. This includes modernizing our locomotive fleet and acquiring freight cars to support replacement and growth opportunities.

Also, we will continue to invest in capacity projects that support our growth initiatives while enhancing productivity. This includes siding construction and extension projects such as those in the Pacific Northwest and the Southwest along our Sunset route. Furthermore, terminal investments supporting our manifest network, such as those in and around our Houston Gulf Coast region, aimed to improve fluidity and increase capacity. On the intermodal side, we will continue to invest for growth in areas like Kansas City, Inland Empire and [ Lathrop ] to name a few. At the end of the day, it's about ensuring we have the right resources and the right place to support growth and drive efficiencies.

Wrapping up. I'm encouraged by the progress we made in 2024, but our work is not yet done. Continuing to focus on the fundamentals of railroading and leveraging new innovative technologies, we will further improve our service product and build a more resilient, efficient network in 2025 and beyond. So with that, I'll turn it back over to Jennifer to lay out our initial financial thoughts for 2025.

Thanks, Eric. If you turn to Slide 17, I do want to start by pointing out that in the appendix, we have a modeling slide that contains several 2025 assumptions that should be helpful in framing our current expectations. And as we talk about the year, all of our guidance is within the context of the 3-year targets we provided at our Investor Day in September. Our team understands those commitments, we are focused on achieving them and our 2025 performance is the first step.

As you heard from Kenny, economic indicators for this year are a bit muted and mixed, some growth, some contraction. Add to that outlook, questions around possible tariffs, interest rates, regulatory changes, et cetera, and our ability to forecast only gets more challenging. As we see the year ahead, there are positives on the volume front.

First, we're starting the year with a bang. Volume is growing and the network is running well. Mother nature has certainly taken a couple of early shots and we'll likely fire a couple more, but our resiliency is strong as we focus on meeting our customer commitments. And you heard Kenny talk about how that service product has helped us secure new business for 2025, as well as the continuing pipeline of opportunities that span our entire portfolio.

We also acknowledge there are some tough spots namely from reduced coal demand and the year-over-year international intermodal comparison will face in the second half of 2025 as today's mix impact turns into a volume challenge. So while there are puts and takes on the volume side, we are confident that we will continue to drive operational and financial improvement in 2025. We will achieve that goal by continuing to control the controllables, by generating pricing dollars that are accretive to our operating ratio, gaining further technology, productivity through technology and by empowering every UP employee to drive asset efficiency.

We expect the combination of our activities to drive volume, price and productivity will deliver earnings per share growth for the full year that is consistent with attaining our 3-year Investor Day CAGR of high single to low double-digit growth.

Finally, with the capital allocation. As you heard from Eric, this year, we plan to invest $3.4 billion back into the railroad. 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. The team has done an excellent job to position ourselves for whatever environment we face this year. We are on target to achieve our long-term goals while maintaining our industry-leading position. We are excited for this new year, and we're ready to deliver.

With that, I'll turn it back to Jim.

Thanks, Jennifer. Before we get to your questions, and I'm looking forward to the questions, I'd like to summarize what you've heard.

First, you heard from Jennifer in the fourth quarter, we leveraged the network to handle volume growth and drive strong quarterly results. Similar to the third quarter, our business mix profile presented a margin headwind. So it was imperative that we generated strong productivity and pricing to offset that impact, and that's exactly what we did.

Kenny gave an overview of fourth quarter volumes and laid out initial thoughts for 2025. Look, there are a lot of unknowns, but in my 48 years of railroading, I've never entered a year without some economic question mark. It is what it is. As you heard from Kenny, our team will focus on outperforming our markets and generating strong pricing for the value we provide. Importantly, I believe our 2024 performance demonstrates that our strategy to operate with a buffer and connect more closely to our customers is paying dividends, both in terms of meeting our customer commitments, and as a direct result, winning new business.

Eric provided an update on our progress to improve safety, service and operational excellence. From a safety perspective, we made great strides, but we still have work to do. On the service front, we're showing our customers what's possible while at the same time, driving productivity. What's exciting for me is that I know we're not done. There are more opportunities ahead, and we have a clear line of sight of how we drive further improvements in 2025.

Lastly, you heard from Jennifer, our expectations for the upcoming year. Key for me is that we're on target to achieve the long-term guidance that we laid out at the Investor Day in September. We operate the largest, most complex rail network in North America and with it comes challenges and opportunities. The team understands our goal is to deliver what's possible from this franchise. We intend to do that as an industry leader that keeps raising the bar as we drive value for our shareholders.

Let me finish with one of my favorite quotes from a [ mentor ]. It's the fundamental [indiscernible], do what you say and commit to it and deliver, and that's who we are at Union Pacific. And with that, I'll turn it over back to you, Rob, and let's start the questions.

[Operator Instructions] And our first question today is from Scott Group with Wolfe Research.

I just want to start on the guidance. The comment consistent with attaining the long-term CAGR. That seems carefully chosen language. Just so we're all on the same page. Like -- does that just mean you expect to be in that high single-digit to low double-digit range on earnings this year?

And then I just want to understand also, Jennifer, the pricing starting to become accretive to margin. Is that -- does that start right away in Q1? I don't know if there's any sort of Q1 color you want to give us?

So let me start, Scott, with the question of where we are. We were clear that we had a 3-year -- and when we commit, just like I said, from my favorite quote from a mentor early, we committed. And you never know exactly what's going to happen this year. What are tariffs going to do? What are the regulatory changes that the administration is going to put in. But our goal is, just as we showed in 2024 with the 7% increase, that we think that that's where we're going to be. We are going to be high single digit, low double digit.

Now if there's things outside of our control, then we're going to have to work harder. But this is not a change from what we said before, and I would expect that every year we deliver high single digit to low double digits, that's the win for us. So that's what we committed to, and that's what we look forward to delivering.

Jennifer, on the accretive piece?

Yes, Scott. So just going back for a second. So fourth quarter, we were accretive. So we actually, I would say, outperformed ourselves a little bit there because we did not think we would achieve that here in 2024, but we did in the fourth quarter. And so 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.

Our next question is from the line of Jon Chappell with Evercore ISI.

Eric, in Jennifer's comments at the start, you noted the record workforce productivity, also said all-in cost per employee of 4% in '25 as you continue to find ways to be more productive. You've done a lot of volume with a lot less resources.

Is it still a labor productivity? Or what are some of the other initiatives you're looking at a '25 to kind of maintain or manage that cost inflation?

Yes. Thank you for the question, Jon. Let me be clear, there is more opportunity, and we're working to capitalize on that. Let's go back to our Investor Day and kind of level set from that perspective.

First thing I'd said at Investor Day was that we focus on productivity because it puts Kenny and the team in the best position to grow in the markets, and that's still and will always be true.

The second thing that we focused on was our culture, our mindset here at Union Pacific, which is to be perpetually dissatisfied with ourselves when it comes to productivity, to keep pushing to find additional opportunities.

So specifically to your question about what are those opportunities, it's going to be some of the same things you've heard in the past and a lot of new things that I'm excited about. The fundamentals, they always stay true. Those are the things in the past that we continue to focus on. The improvements we made in the fourth quarter regarding our recrew rate. Even moving that just a single point has a significant productivity driver for us.

The work that we did to reduce our people starts in our yards and [indiscernible], approximately 2% and 4%, respectively, in the fourth quarter. That's about the technology we're putting in the yards and being able to be even more productive with it.

On the technology front, the work that we do, and have continued to do, and will continue to do, on the automation of our terminals and pushing to reduce [indiscernible]. Then when you get outside of the terminals and the transportation side, you mentioned a couple of them, and the engineering team as they work to continue to automate inspections, maintenance tasks, distribution of materials. And then, of course, you have the whole bucket of purchased services, and I see great opportunities in that. And we capitalized on those in 2024, but there's more.

When you start to think about the technology we have to automate some of our vans across the system and when you're using hundreds of thousands of van starts per year, a 10% improvement in that is really meaningful for us.

So here's the bottom line. 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. It's not just operating. 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.

Our next question is from the line of Stephanie Moore with Jefferies.

Sorry, I was on mute. This is Joe [ Hafling ] on for Stephanie Moore. Congrats on the results. I wanted to talk about, one of the things you've mentioned over the last couple of months has been maybe a reduction in regulatory burden. And maybe consistent with what you talked about on the second question here.

What are some sort of specific areas maybe that you've seen additional red tape? Or what areas do you think you guys could particularly benefit if there's reduced regulatory burden on you guys in particular? I know you guys had mentioned a lot of things on the Investor Day, so [indiscernible] specific examples, that would be very helpful.

Well, I think the largest thing is we've applied for a lot of waivers that would help with the technology that we've implemented to make the railroad more efficient, provide better service to our customers. Those are the things that are out there that we hope with the turning of the page and how regulations are being talked about at the federal level, that we get those improvements will allow us to be able to provide better service and, of course, be more productive. So those are just to name a few. And there's a lot of waivers that we've applied for that are being outstanding for years now that we're looking forward to it.

So I could go on here for about 45 minutes on things that regulation-wise, I think would help the industry make us safer provide better service and be more productive. But that's a good way to look at it is those waivers that we've applied for over the last number of years.

The next question is from the line of Brian Ossenbeck with JPMorgan.

I wanted to come back to the -- I guess, there's a second break person rule. So I wanted to hear a little bit more about that because you mentioned there was one earlier. So thanks for pointing that out.

And then also, Jennifer on the comp per employee for the full year, you're still rolling out last year heard storing out some of the predictable work schedules for the engineers. As I understand that there's still some negotiation going on with the conductors for something similar. So maybe you can just give us a little context in terms of the other break [indiscernible] agreement, How's different to the first one? And then how do you see this other 2 factors or agreements, I guess, for the engineers and conductors rolling out for the rest of this year and what you expect in the numbers there?

I'll let Eric talk about the break person agreement and what that really does. But just as a reminder, we did one in the second quarter of 2023 and now this one here in the fourth quarter, and we actually have one more region that we're working on there.

In terms of the rollout of [ Work Rest ], we continue to roll out on the engineer side and we continue to work with our conductor Smart TV in terms of coming to an agreement. And that's all really part of the mix as we think about the statement that I made about the all-in 4% comp per employee in 2025.

Yes. And Brian, I'll just add to that. If you think about the -- on the engineer side, there's 28 hubs across Union Pacific and 20 of the 28 already cut over. So we're nearly 75% cut over.

Now thinking about the [ brake person ], the way to really think about it is you're kind of going to go back in time a little bit. So go back in the days when you had 5 people on every single train. And that's the context you got to think about this [ breakperson ] deal. As the technology has improved over the last 40 years, including the technology that we're still implementing to this day, you just have less demand for some of those 5 people, and we've demonstrated that, right? At most the crew today has 3. That third person is the brake person, and we have that in some parts of our railroad.

In Jennifer's prepared comments, he referred to it as a regional brake person agreement, that's because not every single area of the Union Pacific has it. So this is very similar to the first agreement that we reached in almost every single regard. And the goal is still the exact same, right. It's to utilize who was in those break person positions as conductors and our normal crew base to be able to provide the service that we sold to our customers.

The only thing I'd like to add is the whole discussion about where we are on implementing with [ Smart ] and with the [ BLET ]. And Eric just said that 20 out of the 28 hubs, we've implemented. What you always -- Brian, when you do those things is you make sure that you still end up with the same number of starts per week per employee, and that's really important. And I sat down very first few weeks I was here, came back to work, what, 16, 17 months ago. And with the union leaders -- and they committed that it made sense that that goal had to be there. And what we wanted to do was provide that time off and that scheduling, but they also understand because they want us to succeed also is that we have a workforce that works, what we expected them to work on a weekly basis.

And what we found results so far is we have to work hard to find ways to make sure that the schedules are set up, and we've had a little degradation, but nowhere near as much as some people write about. I'm always surprised when people write about those things without the detail. But at the end of the day, I'm very comfortable that we have figured out a way to move ahead and do this right so that we don't add incremental cost to the company when we provide and the unions have agreed that it is going to be cost neutral for us or start neutral, wages still went up 4.5%. So the wages are the wages that we've agreed to. But that's the way to look at it is that we're very comfortable.

And with [ Smart ], we'll get to the right place that's good for our employees. We want our employees to have [ regular ships ] I'm one of the guys who is a CEO in this industry that's actually worked on the ground as a locomotive engineer and conductor, and to have schedules that help you plan your life so that you can balance the demands of working and also everything else, your family and everything else is really important to me. So we'll come to the right place, but we're also being smart about how we get to it. You can't have a deal that's all one-sided.

So I'm looking forward to working with Smart to finalize the deal and working with the [ BLET ] to implement the last 8 terminals that we have. But I think it's a real positive for both of us and will become -- it will help us to become even more efficient in the long run. Because people with schedules will not take as much time off as they did before once they get used to what their work schedule is.

So sorry for the long answer, but I just needed to sort of clarify because I know there's some noise out there about what the effect is for us, okay.

Our next question is from the line of Jason Seidl with TD Cowen.

Nice job with the quarter. You briefly touched about some of the unknowns that are out there. There's obviously been a lot of talk about potential tariffs with two of our largest trading partners [indiscernible] Mexico. Clearly, you guys have a big position in Mexico with your access to the Mexican interchanges as well as a partial ownership of [ FeraMAX ].

I guess if we do get that tariff on February 1, sort of what are the expectations on volume? And then, I guess, what potentially could have an impact if cross-border business with you guys would decline because of that?

Listen, let me start and then I'm going to pass it over to Kenny, who knows our markets and what the different business mix would be something happened south of the border. Does it give us more business out of origination in the U.S. I'll leave that to Kenny. But let me talk in general the way I think about this is, I have never -- for all the years I've been railroading and I just bought hate to say that number because I think it's -- I've been rail roading longer than most people on this call have have been alive. But at the end of the day, I have -- there's always something, and this is the way I see it.

We have the capability of Union Pacific to react to what anything that's thrown at us. Good strong balance sheet, real good, focused marketing team, operations that's looking to be more efficient. And I look at the entire package. If we get tariffs, but we also get the regulatory changes and we get the tax changes that were talked about by the President, with how depreciation is going to work on capital and how our corporate tax rate works, that could be a lot of positive.

Now I don't expect any of that. That's not what we plan. We plan for the worst. If something really bad happens, make sure that we are in a good position to handle that. So I think that with the puts and takes of where our business is, we'll deal with it, and we're waiting to see what actually happened.

I'm hoping that it's a negotiating position by the President, and because I don't think anybody, the consumers in the U.S. would love to have increase in prices because of dispute unless there's some strategic reason that the President needs to do that for security of the country. But overall, I'm very comfortable that we're going to be in a good position as we move forward, and we'll just react on how we see things happening. Kenny?

Jim, I'll tell you, you covered a lot. So all I'll say is, and we've seen this before, it's really about being prepared. And what generally happens is maybe the origin location shifts from Asia to Mexico or Canada, and that commodity is priced, and that tariff is priced in. But being prepared is the critical thing.

Eric and his team have demonstrated that, especially in the second half of this year when we saw that happen on the West Coast. Same is true with exports. We saw that on the grain side where it may shift from P&W [indiscernible] to the Gulf or go to Mexico. Regardless, it's all about preparedness -- and I'm telling you, as we're humming along here from an operating and service perspective, I feel good about our posture going and regardless of what happens.

Our next question is from the line of Chris Wetherbee with Wells Fargo.

I guess I wanted to maybe pick up on the West Coast and get some perspective about how you think about sort of the shifts. I know international intermodal has got some pretty challenging comps, particularly as you move into the second half of the year.

But Kenny, any sort of perspective you can give what you're seeing from your customers? Maybe how real time any of those shifts may occur? I know we kind of have a tentative agreement on the East Coast. So potentially, there could be some business moving around a little bit.

And then just maybe in terms of the pricing piece. I know we're getting back into sort of accretive pricing. How do we sort of think about the opportunity in pricing as we move forward over the course of the next year, or maybe longer, in terms of the service recovery in the network ultimately, the inflation that we've seen across the sort of the broader market outside of transportation and maybe what your opportunity is to try to cap into that? Just want to get a sense of maybe how that plays out.

Yes. Chris, on the international intermodal side, we are seeing some pull ahead taking place and whether it's the hangover from some of the strikes on the East Coast or whether it's just the idea of the tariff, you can see our numbers and they're pretty strong here as we are walking into January. We'll see how that plays out for the rest of the quarter before I can really tell you what will happen.

We've got the tough comps and I've talked about that. Those are in the second half. But sitting here on January 23, the thing that's premature to go out and make a strong forecast about what will happen there.

Now on this whole thing around pricing. I just want to reiterate what Jennifer said, and we were price accretive in 2024, and we expect to be price accretive in 2025. Eric and the team have really done a great job of providing a strong service product. Our commercial team sells it, and we're providing the service that we've sold to our customers. I want to hit that hard. We're sharing the investment that we're laying out to support the growth.

Our commercial team is crystal clear on what's acceptable going in from a pricing standpoint based on the service that we've sold. With that, we're going to take some risk, but it's all about aligning the service we've sold with maximizing price.

Our next question is from the line of Ravi Shanker with Morgan Stanley.

This is Christyne McGarvey on for Ravi. Just to circle back to some of the service comments. It sounds like you guys have a pretty good confidence going into 2025, but I wanted to touch on kind of what's underpinning that?

And maybe particularly in the context of perhaps a better environment than you guys are currently thinking about if the volumes do snap back a little bit more aggressively, how you guys feel the kind of capacity is there to meet that without much service disruptions or customers?

Well, I love the question that says what happens if we have more business. I think I like that question. That would be a great outcome for all of us. If the U.S. consumer stays strong and grows the demand for us.

We operate a railroad that -- and we keep on talking about buffer, and I think we showed it with the large increase in international. And that's the way we look at it. We want to have our assets in place, operating them efficiently, but we carry a buffer, especially the assets that we can't inbound into the company if we need them in a quick manner. So locomotives, railcars, we do that.

Capacity on the railroad, we operate our railroad with the capacity because we need to recover from events like we just had in the southeast part of our network, we need to have a buffer. So we run with a 20% to 25% buffer on our capacity -- rail capacity, because our business goes up and down, customers don't release cars 7 days a week. There's a big drop in the weekends. So we have that buffer. That's the way we look at it.

Listen, the best thing that could happen is a 10% increase in volume across the board. I think we're set up to handle that, and we'd onboard the people to be able to handle that in a very quick manner. So that would be the best problem I would have in 2025. Thank you very much for the question.

Our next question is from the line of Ari Rosa with Citigroup.

Congrats on the nice results here in the fourth quarter. So I wanted to ask about the operating ratio. You mentioned this expectation of industry-leading operating ratio. Just wanted to understand a little bit more. What gives you confidence in that target? And if you could talk about kind of how you perceive the structural advantage of the UP relative to some of your competitors, especially given the context of [ BN ] maybe having some challenges in the fourth quarter that maybe held up some of their intermodal partners.

So if you could just give a little more color on that outlook, both kind of short term and longer term, how we should think about that, the OR evolution?

Ari, I don't -- I'm not going to comment about any other railroad. We have a position that -- it's a complicated network that we have. It truly is. It's not linear. It's complicated. But I think we've fundamentally figured out a way to operate it and be as efficient as possible.

We want to be the leaders when it comes to operating ratio. And that's what we're delivering. And I'm not sure what the other railroads are going to because we're first up. I'm assuming that we will have the best operating ratio. That's an outcome of everything we do. That's the important piece is, Ari, what do we do with -- do we provide good service so we can maximize price, so our customers can win and grow in the marketplace. That's really important for us. That triangle is that operationally, do we look at our assets, how we operate the number of people? And do we use technology? And like we're excited about net control and how we're going to be able to quickly change our operating plan faster than we've ever been able to do before to run -- to operate the railroad more efficiently.

So with all those things, I personally -- and I said this publicly and I'll say it again, all the railroads should be very close when it comes to operating ratio. There's no reason for the Class 1s not to be, and I know some -- I'll probably get some notes from some of the other CEOs and I'd appreciate the call or the text. But at the end of the day, we want to be in the best position. And you can see what happens when we have a little bit of volume. We price smart. We operate the railroad efficiently. We end up with a [ 58.0% ]. Are we always going to be at [ 58.0%? ] No, we might go up a little bit, depending on what the market conditions are. But we're going to drive that to be the best.

And stay tuned, okay? I don't think anybody thought we were going to be able to deliver a [ 58 ] and hang on and watch us go. That's the win for us. Anybody else wanted to comment anything further? Nobody else wants to say anything after that. Thanks for the question.

Our next question is from the line of Bascome Majors with Susquehanna.

In one of the earlier questions, you talked about some opportunity with the FRA waiver backlog potentially beginning to clear and opening up some efficiency. But this week, we also had Patrick [ Hughes ] take over as STB Chairman. Can you talk about that side of the regulatory fence? What have you learned from working with him as a Board member over the last 6 years?

And over the next several years, what opportunities is UP or the industry have that might not have been on the table under [indiscernible] [ Overman's ] leadership?

Yes. Listen, there's always changes in who leads and I've had a number of meetings with Mr. [indiscernible], okay, very smart individual. And and the rest of the Board is very strong. So at the end of the day, the way I look at it is we have the same goal. We want to provide good service to our customers. And if we can provide good service to our customers, they win in the marketplace and we both win and the STB deals with those things.

Now at the end of the day, there's a lot of other things that the STB does. They look at mergers, they look at acquisitions. And I'm absolutely sure that everybody, the STB and the railroads would like quick decisions, quicker movement on what's happening. And I'm hoping that, that's how we move ahead. But I'm very comfortable that the relationship will be strong and we'll continue to have a strong relationship with all the regulators.

There is a position to have regulators there. There is a need, and I'm very comfortable that we'll work with them and be very transparent about what we're doing at Union Pacific. Anybody else have any comments on that any further? Because you've all met with the STB, Kenny?

Not one. I mean, we're looking forward to it as the commercial leader, we want quicker outcomes so that we can service the marketplace. So it's encouraging.

Eric, anything from -- you deal with them lots?

I think that's the exact same comment. I mean even in the engagements that we've had with them on even service things, right, continuing to move faster. I know Patrick in the past has had a really good perspective on how we think about service. So looking forward to working with them.

I know, Jennifer, you don't meet with them as often, but maybe we should get you there more often because you've got a better personality for it than me, maybe, but anything to add?

No. I think your point about our goals being aligned is the important one. They want a strong rail franchise. It's the best thing for the nation or national security, our economy, and we want to grow with our customers. And I think working together to fulfill that purpose is what everybody wants.

Perfect. Great question. Thank you very much.

Our next question is from the line of Ken Hoexter with Bank of America.

Congrats on the solid OR and results, but maybe digging in a little bit on that, Jen, you guided in the appendix, the other expense to [ $325 million, $350 million ]. Maybe can you delve into what happened in the fourth quarter? I think you mentioned the bad debt expense. Can you talk about a scale of the one-timer, or the scale of casualty expense that we should see bounce back?

And I guess maybe I'm just ultimately getting at trying to think about the cadence to first quarter. Can you talk about seasonality in what we should -- I know you don't delve into quarterly specific, but maybe just normal historical seasonality, how we should think about the move given the improved performance here in the fourth quarter?

Yes. I mean when we look at other expense for the fourth quarter, I mean, casualty was really the driver there. I did call out the bad debt expense, but the bigger piece was the casualty, both in terms of looking at it year-over-year because we did have a pretty big step-up in fourth quarter of 2023, as well as the fact that we're starting to see some better performance here in 2024. That's a little slower to come through on the expense side, but you heard Eric and Jim both talked about the fact that we're continuing to drive better safety performance. So that's really where I'd focus in, in terms of the driver for fourth quarter.

In terms of looking out into 2025 within that category, it's probably one of the least seasonal categories we have, quite frankly. State and taxes, state and local taxes is the biggest component of that. And then you do have some of the other things like the casualty like bad debt, travel, all those fun things. So I wouldn't think about that in terms of a lot of seasonality on that expense line.

I mean, just on the expense on cadence into first quarter of kind of the OR, did you normally see 150 basis point deterioration. Is that would you see that given all the backdrop that you're talking about in a big picture way?

Yes. I mean, obviously, I'm not going to give you a guide, Ken, for the quarter. But I think in terms of seasonality, you understand it, there is a difference. When you start out the year, you have some beginning of year costs, if you think about some of the payroll taxes that kick back in for us, our business is a railroad. You generally see some of the lowest volumes of the year in the first quarter.

And then you tend to have some more weather expenses. I mean, I'm not used to paying for snow removal in New Orleans, but I think I'm going to this year a little bit. So you have some of those things happening. So pleased to see the way the railroad started in terms of the volume demand and the fluidity. But from a seasonality perspective, I wouldn't look for anything unusual there.

Our next question is from the line of David Vernon with Bernstein.

So Kenny, I got a couple of questions for you. First is, in the intermodal business, can you give us a sense for where utilization is in the box pool fleet for you guys right now? Obviously, there's a lot of channel inventory that's been built up by the intermodal marketing companies through the pandemic taking too many boxes. I'm just wondering where your utilization is kind of running right now on railroad owned equipment?

And then the second question would be whether this recent uptick in natural gas prices that we're seeing may have some benefit for you on the pricing side with some of your utility coal contracts?

Yes. So the first question, thanks. We certainly did deploy our rail fleet in the second half. We saw it grow and really do really well in our portfolio fleet. When I say portfolio, I'm talking about the private asset both the [ IMC ]. So we saw shrink there. It wasn't fully deployed. So there's upside there. And so we'll see what happens as we move throughout the year.

Switching to natural gas I'll tell you. It's one of the most volatile things to do, and I've been in this role now 7 years, and I've gotten out of that game of trying to forecast what's going to happen with natural gas. But bottom line, you asked a direct question. We should see some benefit if natural gas prices increase, absolutely.

Right. And is there any way to quantify how many more boxes kind of are stacked today versus maybe you would have had normally pre-COVID?

No, I would just say that if you look at the overall market, again, I mean, the overall market is still not where it should be. There's still upside. And so we still feel good about deploying those boxes as the market comes back.

The next question is from the line of Jordan Alliger with Goldman Sachs.

Just coming back to intermodal. If the trends hold up that international facing those tough comps, maybe volumes be tough to grow in the back half of the year. Does the domestic intermodal offset can that provide even if volumes are perhaps down? Can that provide a favorable net positive in terms of mix, margin, EBIT dollars, et cetera?

You want to start?

Yes. I mean, everything depends on magnitude, right, Jordan. So I think it's unfair to really kind of focus in on one commodity line like international intermodal. You're right, the comps are going to be extremely tough in the back half. But there's a lot of other businesses that we move, and that's really what's going to ultimately play into what our financial results will be. So maybe domestic intermodal offset some of that, but we've got a lot of other business lines that we're going to move, and we're going to try to maximize those.

So I don't know that we want to get into the game of trying to make a prediction about how the back half actually looks. There's a lot to happen between now and then.

But the bottom line is we feel confident and we're bullish on the domestic intermodal market went into 2025. That's the key.

We've had some great franchise wins there that we still haven't seen the full benefit from.

Our next question is from the line of Daniel Imbro with Stephens.

Maybe to follow up on the volume outlook. If you look on the outlook on Slide 11. On a headline, there's more pluses than minuses. But how should we think about the mix impact on revenue per carload? You just talked about intermodal in the previous question. But I guess, any visibility into changes of mix within mix within these categories that we should be aware of when we think about the market share wins?

And Jennifer, I understand that you don't want to guide each quarter, but how should we think about volume growth through the year given the more difficult back half comparisons? Can we grow volume each quarter? Would that be kind of a base case expectation? Just any color there would be helpful.

Yes, Daniel, thanks for the question. So I mean, we specifically aren't giving volume guidance either for full year or on a quarterly basis. I think you've laid out, as we laid out, kind of what some of the puts and takes are through the year. I think the important thing is, is that we're very well positioned. The service product is good. Kenny and his team are out there winning new business. And so we're going to do all we can to push that curve upward.

But there's also market forces out there that we're going to be playing against, and we'll just see how that all plays out.

From a mix perspective, and I did say this in my comments, when I look to the back half of the year with what we expect to happen from international intermodal, that will alleviate that mix pressure that we had in the back half of 2024. How that ultimately shapes out, kind of similar to my answer to Jordan, will depend on what the rest of the business is doing at that point in time.

But I think you're thinking about the different components correctly. It's just a matter of what else layers in along with those as we go ahead. Certainly, mix will continue to be a challenge here, at least in the first part of the year as international Intermodal stays strong.

I don't know, Ken, if you want to add anything else?

You've hit it all. Again, the credo here for the management team is we're going to have volume outpaced the market, and we expect the revenue to outpace volume.

I guess the only thing I would say is this, our business mix actually is, is we've got a broad range of customers in a broad range of markets that we play in. So of course, we want to maximize all of them in a smart way that fits our network, makes our customers win and it's service that we can provide at our level.

So puts and takes. International we don't see it being able to stay at that. Nobody -- if I go back to the early part of 2024, nobody thought the international Intermodal for the Western railroads was going to grow in for Union Pacific as much as it did, but it did. But we also have products across. Whether it's industrial products, whether it's sand for fracking you name, and that's the nice part about our franchise is the different types of customers that we handle. We move every day products that America needs for finished products, consumer goods and inputs to the economy.

So I'm very happy. It's great to have this franchise that was built by a lot of people before I came to Union Pacific. So that's the way we look at it. And of course, Kenny's job is to maximize it. Otherwise, why do you have a marketing department, right? So I'm looking forward to another great year, Kenny. Thank you very much for the question.

Our next question is from the line of Walter Spracklin with RBC Capital Markets.

Walter, how is it in Canada?

It's pretty cold, but my backyard [indiscernible] is in good shape, Jim. That mentor quote, it sounds like it was a quote from Hunter, am I right?

Well, it was a little earlier, but I think Hunter would have -- might have said it in a different way. You might have not called [indiscernible] But at the end of the day, yes, he would have said something very similar. It's -- don't worry about all these things that you can't control. It's the fundamentals. If you operate a strong railroad. If you look at your costs, you make sure you're very efficient. Don't lose sight of what's important, you end up on the winning side of the game.

You end up on the winning side of the hockey game, Walter, good, strong defense, right, in hockey, always wins the Stanley Cup. [indiscernible] person in the front, that strong core defenseman that make a difference and a strong goal. So that's what we're all about.

Well, my son will be happy to hear that comment for sure. Speaking of those fundamentals, Jim, you talked a bit about guidance, and it's predicated on a mixed economic outlook. And I know you like that kind of scenario analysis where we look at the upside, and I know a few of your trucking peers spoken pretty constructively here today about that potential for an improvement in the economy.

So if we do see that, where do you see the most opportunity for leverage if we get a better macro? And more importantly, is this type of operating leverage that you're engineering here, Jim? Is this setting you up for potentially coming in above the high end of that low double-digit band? Or is the low double-digit capture if the economy gets better than we will do low double digits? Just curious to hear how that sensitivity works out for you.

Well, Walter, if I didn't have a few hundred people on the call, maybe I would say something different. But bottom line is you know what we talk about. But you know what, you always hear from me, but I've got a strong team with me. And Eric does a fantastic job about how we operate every day and Kenny does a fantastic job. I [indiscernible] so often about why do we need a marketing department. So why don't I let them talk about what they see and what we have operating leverage and what we see customer leverage as we move ahead and what that would mean.

So Kenny or Eric?

I'll kick off, Eric, and then you take over. I mean, look, we laid out the slide, but I'm very bullish on what we're seeing in our grain products area with renewable diesel. And I'm bullish from a number of reasons.

One is structural. You -- we've talked about these facilities that are on our line. Eric service product has given us flexibility on the grain side to move anywhere in the world, whether it's going on in the Gulf, whether it's going to Mexico, whether it's going to the PNW. And we'll see where coal ends up. I got a coal question a little bit early. It started off [indiscernible] solid here, and we've got a win that's coming off.

On the industrial side, our petrochem business has been strong. We've had some wins. We've been investing in that area to help us grow, we'll see that in terms of expansions coming on this year. And then we got to look at some of these other macro indicators, what's going to happen with [indiscernible]. That has a really, I'll call it, a step function impact on us from a lot of different commodities.

And then on the premium side, we should see automotive market improve as we move throughout the year. Domestic intermodal, I mentioned high on and should be positive. And on the international side, I'd be [indiscernible] say we've gone out and tried to minimize those comps by winning some business last year and trying to retain portions of it, not all of it, obviously. So we'll see how that plays out.

And then, Walter, if you pick it up from there, then the question becomes are there proof statements in Union Pacific's recent history that demonstrate that we can do exactly what Kenny just said that we can support them as he's out there in the market. And there are a number of them.

We talked about International Intermodal, and I think we've talked about that one enough, a massive accomplishment for the team. But think about if we were sitting here a year ago, nobody would have expected the shift on the grain side away from the Pacific Northwest as much into Mexico. But you didn't hear any noise about that. Instead, you saw us pivot use some of those buffer resources we have, leverage our strong relationship with [indiscernible] to be able to grow that market share.

You also see it in the example that I mentioned in my prepared comments about the Houston Gulf Coast project. Sometimes when people think about capital investments and we say projects, they think it's one location, and we must be building just a siding. That project collectively is a massive undertaking, and it's a very strategic undertaking to say where do we have to make just small adjustments, small investments in many different terminals to make sure that we can support exactly what Kenny said.

And then finally, one of the most exciting ones for me and certainly for all of us. I tell you, every single expansion we do it on an Empire, Kenny's team just keeps filling it out. And so we have many proof statements that say we can support exactly what Kenny is setting out to do in 2025.

I appreciate the color, Eric, Kenny.

Walter, thank you very much. And listen, that's time for one of the Canadian teams to win the Stanley Cup, okay. And I think the [ Edmonton Oilers ] are going to do it. I've been following them for a long time, and I've been suffering for many years, Walter. Not as bad as you in Toronto, but that's okay. Don't worry about it.

Our next question is from the line of Jeff Kaufman with Vertical Research Partners.

Congratulations on just a terrific execution quarter. Kenny, I want to come back to you, if I can. I like your answer to Jason Seidl's question be prepared in terms of dealing with these known unknowns. But I want to dive a little bit deeper.

When I think about what could be at risk on the tariff side, I'm not talking about the tax change or regulatory benefit. You would think, obviously, export grain south. You would think beer imports north. You would think auto parts. -- what elements of your traffic mix either have maybe a Canadian Intuit that we might not see as obviously or a Mexican import export and that might not be as obvious to us on the outside?

Well, first of all, I just want to say it's all fluid, and I'm not aware when I look across our commodity groups where -- maybe there is one specific commodity I can think about, but most of these commodities have different entry points and different origin points, different destinations. That's why I talk about preparedness because we have just a great franchise to be able to capture that.

So whether it's finished vehicles that have to come in through the Gulf. Whether it's finished vehicles that have to come in through Mexico. Whether it's finished vehicles that we move out of the PNW. We have different entry points and destination points to move in and out. That's why I harp so much on preparedness. The end consumer is going to consume these products. It may be a few pennies more. They're going to consume the product. It's just how it's going to get there. And our commercial team is all over this to make sure it moves Union Pacific.

So maybe to your point, I guess, maybe the thing we should be thinking about is, maybe the way it gets to where it's going changes, but your feeling is that the team will find a solution if that has to be?

So I hit that point, I thought I hit it hard earlier. That's exactly what I'm saying. Our job, our commercial team needs, and we are, and we're dialed in on where these changes will be and then coming up with solutions with Eric's team to make sure we can deliver.

Yes, [indiscernible] to say that, and thanks for the question. I think you summarized it well.

Next question is from the line of Tom Wadewitz with UBS.

I wanted to -- I think you had some pretty positive and convicted views on pricing and focus on price, which is great. How do you think about the truck, your assumptions on truckload market? And do you just think, well, we'll get a little help from some modest contract increases in trucking that helps us. And -- or how do you think about that?

And also just on intermodal revenue per unit, is that something that's been a pretty meaningful drag for a while. I know some of that [indiscernible] surcharge and mix and everything. But -- that's been a pretty big drag. How do you think about revenue per unit in intermodal in 2025 as well?

So the last couple of years, we -- I have resisted from going on and forecasting [indiscernible] back half, back half. We want to look at the data points and the market data points, we'll tell you whether you're looking at [ DAC ], whether you're looking at [ FTR ], that it should improve as we move throughout the year.

Customer sentiment is the same as we're talking to a number of our IMCs and private asset folks will let that market play out, the timing of it. We'll see where that goes. The extent of it, we'll see where that goes. And yes, if that improves, we should see some uptick there based on how we position things in terms of that revenue per box.

Yes. And Tom, I think you really nailed it in terms of what you see as the drivers there. I mean, it's one of those categories where we have mix within mix. We talked at our Analyst Day about how our international intermodal has our lowest revenue per unit of any commodity that we haul. And so when that's growing strong within that group, you see that impact. And of course, fuel coming down is another thing. So both of those are really what you see happening there, as well as the tougher competitive environment.

The only thing I can add, Tom, is just on the productivity side of the way we've been able to change the way we operate our our lowest revenue movements. And no offense or buts, there's a big difference between some products that we move because we don't price the same for every commodity. But at the end of the day, we've done a lot of work on terminal well, car speed, car velocity, how many boxes we can put on a train to be able to make it more efficient for us so that we handle the difference in the revenue that we make.

And that's -- and the Eric's team works every day, every minute on that commodity to see how do we optimize the railroad and the cost structure that we have against the revenue that we make on it. So it's a challenge. And -- but at the end of the day, I think we've done a pretty good job of it, and we still love that business. It's good for us and moves through our whole network. And the more efficient we can get, the better we are on being able to handle more of it in an efficient manner and maybe put a little less pressure on Kenny -- Well, I guess not. They price it up.

The next question is from the line of Oliver Homes with Redburn Atlantic.

[indiscernible]

Oliver you're breaking up. I can't understand it. I don't know if anybody else from the table can?

No. All I hear is something about CapEx.

Yes. Can you maybe just get into a little better spot or something and see if you can get through to us, please?

No, still breaking up, Oliver. Can we go to the next question and then see if we can get Oliver in a different spot because I know we're down to the last couple?

The next question is from Brandon Oglenski with Barclays.

I know it's been a long call, and I was off for the front part of it, so apologies if I'm replicating something here.

But I guess, Jim or Kenny, we've heard about better service. And I think what investors are looking for at Union Pacific and other railroads is to finally see real volume growth. So on the back of those service gains that you guys have made in the network, Kenny, within the context of your comments about volume outpacing the market this year? I mean, is this incremental wins? Is it business development efforts that are driving this? And finally, leveraging that service product?

Yes, absolutely. I mean if you look at our network minus the business development wins, especially in markets like the automotive that I highlighted in markets that are challenged, where we have structural decline like coal and markets that are emerging, and we're ahead of it in renewable diesel in a market that we expect to grow from an export perspective on the petrochem side and industrial chemical side, absolutely. The business development wins matter, and it does help us outpace the market. So no other way to really say that then they just hit that one head on.

Brandon, thank you very much. Operator, do we get the Oliver back on or not?

No, we did not. Mr. Vena. I'll turn it over to you for closing comments.

Okay. Well, listen, Oliver call in. Brad, and and the team are always willing to answer the question, so I apologize that it didn't work out.

But listen, I'm very proud of the team. I'm very proud of the focus. I'm proud of every -- today, right now, we have 15,000 people out there moving, touching and working to move the products that we sell. And the rest of us are in a nice warm office, and they're out there working. I can't be more appreciative. Great quarter for all of them, great quarter for us and looking forward to speaking to all of you, if not at some conference or at some other time at the end of the first quarter.

So thank you very much. Have a great day, and and let's enjoy the day as we go forward. Thank you.

Thank you, Mr. Vena and thank you to everyone for joining us today. You may now disconnect your lines at this time. We thank you for your participation, and have a wonderful day.