Union Pacific 4Q16 Earnings Call Notes

Union Pacific’s (UNP) CEO Lance Fritz on Q4 2016 Results

Mexican trade is inextricably linked to our economy

“Sure. So we are paying close attention to all of the talk about potential outcomes as we go forward in terms of impact on either NAFTA or other international trade agreements. Our perspective is that the United States is tightly woven with its trading partners and our consumers benefit greatly from free and open international trade, both from a standard of living perspective, making goods available to them at lower cost than they would be otherwise, as well as creating markets for U.S. goods to be sold into, creating a robust potential growth for U.S. jobs and typically the higher paying U.S. jobs. When we look at the cross-border trade let’s say specifically with Mexico, when you really dig deep, you see that a large percentage, certainly more than half, a lion’s share has value added on both sides of the border and is inextricably linked to our economy. So we’ve been giving that kind of feedback to our elected officials and regulators for a long time. ”

Rob Knight

Core pricing will continue to be challenged in 2017

“In fact, if you exclude coal and international intermodal from the calculation, our core price on the rest of our business lines would be in the neighborhood of about 2% to 3%. Given these market dynamics, our core pricing will continue to be challenged throughout the first part of 2017 before beginning to strengthen later in the year, assuming market conditions improve. That said, I want to reiterate that our pricing philosophy has not changed. We will continue to price our service product based on the value proposition that it represents in the competitive marketplace, at levels that generate re-investable returns. This should result in real core pricing gains, and contribute toward improving margins over the longer term.”

While inflation is rising we have pricing pressures

“Yes, Justin, I guess, I would just kind of build on Lance’s point. We don’t give specific guidance as Lance pointed out, but we are – take one message from us here, that while inflation’s rising, while we have some challenges in the marketplace as it relates to pricing, we are still committed to pricing at reinvestable levels that are above the overall inflation costs in the year. ”

We’re not sitting here holding back investment decisions based on the tax rate

“. I mean, we’re not sitting here thinking about making – holding back, making capital investment decisions based on the tax rate as an example. So I would anticipate that that wouldn’t impact sort of how we treat that and I think it would be to the benefit of us and our shareholders if that played out and we would have the expectation of hanging onto it.”