Q1 2021 Union Pacific Corp Earnings Call
Greetings and welcome to the Union Pacific first quarter 2021 conference call.
At this time all participants are in a listen only mode a.
A brief question and answer session will follow the formal presentation.
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As a reminder, this conference is being recorded and the slides for today's presentation are available on Union Pacific's website.
It is now my pleasure to introduce your host Mr. Lance Fritz Chairman, President and CEO for Union Pacific. Thank you Mr. Fritz you may begin.
Thank you and good morning, everybody and welcome to Union Pacific's first quarter earnings Conference call with me today in Omaha are Eric younger Executive Vice President of operations, Kenny Rocker Executive Vice President marketing and sales and Jennifer him and our Chief Financial Officer.
Before discussing first quarter results I want to recognize our employees for their work during the major winter events, we experienced in February and early March many of the communities. We serve faced unprecedented weather conditions that damaged factories and they'd surface transportation nearly impossible our employees rose to the occasion to.
Maintain a restore critical service in those areas, while dealing with weather impacts to their own homes and families. We owe a debt of gratitude to our team as they again prove the resiliency their grid and their dedication to serve.
Moving on first quarter results. This morning Union Pacific is reporting 2021 first quarter net income of $1 $3 billion or $2. A share. This compares to $1 $5 billion or $2.15 per share in the first quarter of 2020.
Our quarterly operating ratio came in at 61%, reflecting the impact of weather and rising fuel prices in the quarter.
As you'll hear from the team absent these items our core results improved 150 basis points, we delivered strong productivity in very challenging conditions and based on our core performance I remain optimistic about the remainder of the year. In fact, we are affirming our 2021 guidance while it was.
A tough quarter it does not dampen our expectations. We're in a terrific position to take advantage of the improving economic outlook and grow our volume per.
Our service product, our cost structure, and continuing productivity set us up for an outstanding year.
To get US started reviewing the details I'll turn it over to Eric for an operations update.
Thanks, Lance and good morning.
The operating team rose to the challenge this past quarter as it responded to numerous weather challenges across the network the speed with which the team recover the network is a testament to the transformation P. S ours had on our operations.
Moving to slide four.
We began 2021 with strong key performance indicators across the board as the operations were solid and running smooth in January however, the winter weather challenges, we faced in February and March across our network had a heavy impact the south in particular is not accustomed to the weather they faced.
In fact, the weather across our southern region represented the second worst stretch of cold temperatures in over 70 years.
Through the team's hard work our network recovered quickly and we were able to mitigate most of the impact to our service in fact, we recovered twice as fast compared to our recovery from the flooding in 2019 and significantly faster than any disruptions, we experienced before implementation of P. S. R.
While the operating team is frustrated with the mixed results you see on slide four we will return all of these measures to a state of constant improvement through execution of our transportation plan.
Weather heavily impacted the results you see in freight car velocity freight car terminal dwell and train speed. However, we continue to make good progress on our efficiency measures as both locomotive and work force productivity improved in the quarter. These.
These improvements were driven by our continual evaluation and adjustment of our transportation plan as well as through our continued efforts to grow train length.
Intermodal trip plan compliance decreased in the quarter as weather and a surge in intermodal shipments up 12% year over year placed significant pressure on that service.
Our manifest service remained solid during the quarter driving improvement and trip plan compliance for manifest and autos. The team did an excellent job of maintaining the service product throughout the weather impact.
Slide five highlights some of our recent network changes.
We continue to push train length to drive productivity, while striving to provide a better service product to our customers.
Train length was almost 9250 feet in the first quarter, which was up 10 per cent or 850 feet year over year.
Non enabler of this great progress as our siding extension program.
During the quarter, we completed two sidings and began construction or the bidding process on another 18 sidings.
We continue to make progress on the redesign of our operations in the Houston area to drive efficiency.
We are leveraging the recent investment of our Englewood facility.
And we consolidated the blocking of local cars that are set against yard, allowing us to curtail operations at four of our smaller yards around the area.
This allows us to bypass those smaller yards and deliberate cars are directly to the customers eliminating extra handling improving transit time and reducing crew starts. We also curtailed switching operations at our North Council bluffs yard by leveraging surrounding yards, which will reduce local train starts.
I look to the future I'm excited about the full pipeline of initiatives, we have to drive productivity throughout our network and enhance our service product.
Turning to slide six.
Free thing, we do is done with a focus towards safely accomplishing our work we understand the continuous improvement we need to make in safety and we have the right plan to achieve our goals.
We remain focused on executing on the P. S. Our principles that transformed our operations.
And there still remains many opportunities for us to improve our operations and drive productivity.
We have work to do to return our service product to the level. We expect we need to return intermodal trip plan compliance to the mid to upper eighties manifest trip plan compliance to the low to mid seventies and freight car velocity is a low two twenties.
We're on that path a day as we fully recognize the importance of providing our customers with a highly reliable service product.
With that I will turn it over to Kenny to provide an update on the business environment.
Thank you Eric and good morning, our first quarter volume was down 1% from a year ago due to weather events and the leap year in 2020.
Solid gains in our intermodal and export grain markets were offset by declines in our industrial and energy related markets.
Freight revenue was down 5% for the quarter due to the decrease in volume coupled with the lower fuel surcharge and negative business mix that offset that we're all set by our core pricing gains.
So let's take a closer look at how each of our business groups performed in the first quarter.
Starting with our bulk markets revenue for the quarter was down 1% volume decreased by 2%, which was partially offset by a 1% increase in average revenue per car due to the positive mix and traffic and core pricing gains.
Coal and renewable carloads were down 16% as a result of continued high customer inventory levels are contract law and weather related challenges, which were partially offset by higher natural gas prices.
Volume for grain and grain products was up 16% driven by increased demand for export grain.
Fertilizer carloads were down 4% as reduced export potash shipment were partially offset by stronger demand for industrial sulfur.
And finally food and refrigerated volume was down 6% driven primarily by decreased demand for foodservice due to the ongoing pandemic as well as weather related challenges.
Moving on to industrial.
Industrial revenue declined 13% for the quarter driven by an 11% decrease in volume.
Average revenue per car also declined 1% from our lower fuel surcharge and mix.
Energy and specialized shipment decreased 14%, primarily driven by reduced crude oil shipments due to unfavorable price spreads and reduced demand.
Forest products volume grew by 7% number was driven by strong housing starts along with an increase in repair and remodel. We also saw strength in brown paper, driven by increased box demand and low inventories.
Industrial chemicals, and plastics shipments were down 9% for the quarter due to the severe storm in mid February that cough plant interruptions for producers throughout the Gulf coast as well as feedstock shortages in certain sectors.
Metals and minerals volume was down 16%, primarily driven by weather and market softness in rock, coupled with reduced frac sand shipments associated with the decline in drilling and third plots and local fan.
Turning now to premium revenue for the quarter was up 2% on a fixed percentage increase in volume.
Average revenue per car declined by 4%, reflecting a mix effect from greater container volume and pure automotive Carlo shipment.
Automotive volume was down 13% for the quarter as manufacturers struggle with semiconductor related parts shortages and extreme winter weather disruptions to the supply chain.
Finished vehicle and auto parts shipments were impacted similarly with finished vehicles down 13 per se and auto part down 14%.
Intermodal volume increased by 12% in the quarter.
Domestic intermodal was up 16 per se.
Year over year due to continued strength in retail sales and recent business wins.
So in particular benefited from ongoing strength in e-commerce.
International Intermodal volume grew 8% despite port congestion related to strong growth in containerized imports.
Now looking ahead to the rest of 2021.
For our bulk commodities, we expect continued negative outlook for coal Hill.
Electricity demand and natural gas prices are forecasted to improve however high customer inventory levels combined with increased demand for other energy sources and our contract law present, a challenging market.
However, there is continued strength for export grain is China remains committed to echo mental AD product purchases and the 2021 calendar year was clearly a tougher year over year comparison in the back half of the year.
We also are optimistic with our biofuel shipments as domestic production is expected to increase which will drive new volume at new U P destination facilities for both renewable diesel feedstock and finished product.
As we look ahead to our industrial commodity the year over year comps for our energy markets are favorable.
Over there it's the uncertainty what the speed of the recovery in those markets.
We are encouraged by the stronger forecast for industrial production for Europe 'twenty 'twenty. One is now forecasted at 6.5 per cent.
Two percentage point improvement since we spoke in January plastic volumes will also remained strong for us in 2021 as production rates increase.
And lastly for premium we expect uplift for both our automotive and intermodal businesses.
Automotive sales are forecasted to increase from 14 million units in 2020 to 16 million in 2020 one we.
We are optimistic that automotive production will normalize and supply chain issues are apart are expected to improve later in the second quarter with regard to your intermodal limited truck capacity will encourage conversion from over the road truck to rail.
Retail inventories remain historically low restocking of inventory along with continued strength in sales should drive intermodal volume is higher this year.
Before I hand, this over to Jennifer.
Like to express my appreciation to our operating and engineering teams for their hard work and dedication to keep our network running in the unprecedented weather events in February or March both of our commercial and operating teams work closely together to quickly recover operations for our customers and win new business with them.
That I will turn it over to Jennifer to review our financial performance.
Thanks, Kenny and good morning, I'm going to start with a look at the first quarter operating ratio and earnings per share on slide 13.
As you heard from Lance Union Pacific has reported first quarter earnings per share of $2 and a quarterly operating ratio of 61% comparing our first quarter results to 2020, the extreme winter weather previously discussed negatively impacted our operating ratio by 160 basis points or 16 cents to earnings.
In addition, rising fuel prices throughout the quarter and the associated two month lag on our fuel surcharge recovery programs impacted our quarterly ratio by 100 basis points or 11 cents per share despite.
Despite these challenges our core operations and profitability continue to improve their living 150 basis points of benefit to our operating ratio and adding 12 cents to earnings per share.
Looking now at our first quarter income statement on slide 14, operating revenue totaled $5 billion down 4% versus 2020 on a 1% year over year volume decrease operating expense decreased 3% to $3 billion, demonstrating our consistent ability to adjust costs more than volume.
Taken together, we are reporting first quarter operating income of $2 billion seven per cent decrease versus last year.
Interest expense increased to four per cent compared to 2020, resulting from an increase in fees related to our debt exchange with some offset from lower weighted average debt level.
Income tax decreased 7% due to lower pretax income.
Net income of $1 $3 billion decreased 9% versus 2020, which when combined with share repurchases resulted in earnings per share of $2 down 7%.
Looking more closely at first quarter revenue Slide 15 provides a breakdown of our freight revenue, which totaled $4 $6 billion down five per cent compared to 2020 factories.
Factoring in weather and last year being a leap year the volume impact on freight revenue was five basis point decrease.
Feel surcharge negatively impacted freight revenue by 200 basis points compared to last year. The decrease was driven by the lag in field surcharge recovery as well as slightly lower fuel prices.
Our pricing actions continued to yield pricing dollars inexpensive inflation. However, those gains were more than offset by a negative business mix and reduced freight revenue 225 basis points.
Although our grain shipments increased in the quarter. This impact was more than offset by very strong intermodal volume coupled with declines in petroleum and industrial product shipments.
Now, let's move on to Slide 16, which provides a summary of our first quarter operating expenses.
Starting with compensation and benefits expense down 3% year over year.
First quarter workforce levels declined 12% or about 4100 full time equivalents generating very strong productivity against only a one per cent decrease in volume.
Specifically, our train and engine work force continues to be more than volume variable down, 11%, while management engineering and mechanical Workforces together decreased 13%.
Offsetting some of this productivity wasn't elevated cost per employee up 10% as we tightly manage head count based wage inflation and higher year over year incentive compensation as well as higher weather related crew costs.
Quarterly fuel expense decreased 5%, a result of lower volume and prices our fuel consumption rate was essentially flat as productivity initiatives were offset by the additional fuel needed as a result of the extremely cold temperatures.
Purchased services and materials expense improved 6% driven by our live subsidiary utilizing less drayage as a result of lower auto volume as well as maintenance costs related to a smaller active equipment fleet.
These savings were partially offset by additional weather related expenses.
Equipment and other rents fell 7% driven by higher equity income from our ownership in T T X.
Other expense line increased $22 million this quarter driven by higher casualty expenses that were primarily related to adverse development on certain claims this increase should not be viewed as an indicator of new piece current safety record.
As we think about expenses going forward recall that last year in the second and third quarters. We took temporary actions in response to the pandemic, reducing management salaries and closing shop. These.
These actions produced a two per cent headwind in total for second quarter expenses predominantly impacting compensation and benefits and purchased services and materials expenses.
For a full year comparison, excluding Brian says we.
We now expect both purchased services and materials as well as other expense it can be up mid single digits versus 2020 lastly.
Lastly, we expect our annual effective tax rate to be slightly higher than previously thought around 24 per cent.
Looking now at productivity on slide 17 in spite of the $35 million of weather headwind. We continue our solid productivity trend in the first quarter generating $105 million productivity results were led again by train length improvements contributing to strong workforce and locomotive productivity as Eric detailed earlier turned.
On to slide 18, and our cash flow cash from operations in the first quarter decreased to $2 billion from $2 $2 billion in 2020, a 9% decline.
Fight that free cash flow after capital investments increased 5% to over $1 4 billion, highlighting our ongoing capital discipline as well as a slightly slower start to our capital programs. This generated a cash flow conversion rate of 106% free.
Free cash flow after dividends also increased in the quarter up $115 million or 17%.
Supported by our strong cash generation and cash balances, we returned $2 billion to shareholders. During the first quarter as we maintained our industry, leading dividend payout and repurchased shares totaling $1 4 billion.
We finished the first quarter with a comparable adjusted debt to EBITDA ratio of two eight times on par with year end 2020.
Wrapping up on slide 19, despite the slow start to the year, we remain confident in our ability to show improvement across all free performance drivers volume price and productivity.
We do face some volume headwinds declining coal demand the lingering impact of industrial chemical plant closures from the February storm and the semiconductor shortage that is continuing to impact autos into the second quarter.
Setting that aside though there are even more reasons to be encouraged about 2021 the pace of vaccination rollouts strong consumer and trade demand in an improving industrial production forecast.
And we are increasingly optimistic about our ability to drive business to the railroad.
Since early March we have seen an improving demand trajectory with March averaging roughly 157007 day carloadings and we crossed the 160000 plus threshold in April so with the strength, we're seeing in our volume we now expect full year carload growth to be around 6%.
Our guidance around full year pricing productivity and operating ratio improvement in the range of 150 to 200 basis points. All remain intact. However, with our updated volume outlook, we will likely be closer to the 200 and the 115, we clearly have work ahead of us to achieve these goals.
Economic picture and good traction on our P. S. Our initiatives give us a path to success.
Turning to cash and capital our capital spending plan remains at $2 9 billion for the year well within our long term guidance of below 15% of revenue as we generate capacity through our P. S. Our focus we will maintain our industry, leading dividend payout ratio and are committed to strong share repurchases specifically, we plan to return approximately six.
Billions of dollars to our shareholders in 2020, one through share repurchases.
Before I turn it back to Lance I'd like to add my thanks to our exceptional work force mother nature tested our capabilities this quarter and once again our work force showed they are ready for the challenges and committed to serving our customers. So with that I'll turn it back to Atlanta.
Thank you Jennifer as you've heard me say many times, our first priority will always be say.
I'm confident in our ability to meet our high expectations in that area.
With the day being Earth day, it feels appropriate to highlight the actions, we're taking to protect our planet.
In February we announced our science based targets to reduce greenhouse gas emissions by 26% against the 2018 base by 2030. Additionally, in our 2021 proxy statement, we rolled out our ESG strategy, which we call building a sustainable future 2030 will expand on.
This strategy in our 'twenty 'twenty building America report, which is going to be published in early may in conjunction with our Investor day.
We're reinforcing our commitment to delivering value to all of our stakeholders as you heard today, we're very optimistic about the future. Our service product made more resilient through P. S. R and lower cost structure is enabling us to win new business and expand opportunities that will ultimately grow the topline.
Looking to the rest of the year in.
An improving economic outlook, our continued commitment to value based pricing that exceeds inflation and the opportunity for strong productivity gives us confidence to affirm our 2021 guidance.
Pacific is poised to take advantage of a strengthening economy by leveraging our best in industry franchise to produce long term growth and excellent returns so with that let's open up the line for your questions.
Thank you well now be conducting a question and answer session.
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In the interest of time, so that we can accommodate as many analysts as possible. We would ask everyone to please limit themselves to one question.
Thank you and our first question is from the line of <unk> Malhotra with Deutsche Bank. Please proceed with your question.
I guess you went from no no follow up for me. This time, okay. So I'll just stick to one the morning, everyone. Jennifer I just wanted to focus on the 200 basis points of our margin improvement. This year I think that implies 56, and a half or for this year, which would be which would be impressive, but it's all sort of imply.
As you guys hitting kind of a mid fifties or better this year at some quarter, maybe in the back half of the year I'm wondering if you could just talk a little bit more about that makes is obviously getting a little bit better, but if you can talk about what you think needs to be achieved to get to the high end of that 150 to 200 target.
Thank goodness.
So yeah, I mean, starting off the year with a 60 day, one and be able to get to you know in that range of 56, and a half day 57, and as we said you know, we're hoping to get closer to the 200 basis points of improvement. That's certainly says we have to improve over the balance of the year and make very strong improvements to hit those targets and so in terms of what.
Gives us confidence it really is a.
The ability to win in the marketplace as we mentioned that we're expecting volume to be up around six per cent or so up year over year as you might recall back in January our original guidance was 4% to 6%. So we're now seeing a strengthening in the economy, Kenny and the team are winning new business and so those are all very positive signs.
And then again the efficiency piece.
Certainly we were impacted in the quarter with weather and feel they took their toll on the first quarter or but we still generated 150 basis points of core improvement and so as we look to grow volume and put some of those are transitory issues behind us we feel good about the rest of the year.
Thank you.
Thanks.
Our next question comes from the line of Scott Group with Wolfe Research. Please proceed with your question.
Okay.
Hey, Thanks, good morning, guys.
Lance just given everything going on I wanted to ask an M&A question. So you guys have been very focused on operating ratio in overtime and I sense, perhaps more of a focus on volume and overall earnings growth going forward I Wonder does that change your view around M&A in and if it's perhaps time to start.
And I'm thinking more about that in and then on the on the specific transactions on the table right now do you have a view where our preference.
C N KSU, where see PK issue as it was one a bigger threat to you is perhaps one that that's more likely to cause you to think about extending your own network reach.
Yeah. Thanks, Scott I'll start with the last part of the question and end with the first part regarding whether the C P or the C N where to acquire the case, yes. Our concern really is the same.
We're focused on is O S. T D. It says the next class one merger unless provides and that is.
And enhancement to competition and clear improvement for all customers through that to be true in any transaction. Our current service product has to remain intact.
So you know our concern is making sure that we have good operational and commercial access to all the customers that we serve currently in Mexico and in other parts, whether that's near or on the CP railroad or the CN Railroad.
As regards to that transaction. The first thing we're focused on is making sure that the STB said so.
A level playing field for all class one mergers and in that does not apply the waiver that they created potentially for the KC US back in 2000 2001, we think those new 2001 merger rules should apply to every class one merger so that the STB has a full proper.
<unk> to vet the game plan to enhance competition by the transaction.
And then if you think a little bit about what we're focused on you're exactly right. We're focused on the three stool to drive enterprise value for Union Pacific. The three legs of the stool excuse me, we're focused on making sure we get value based pricing in the marketplace. We're focused on making sure that we're efficient and productive both in assets and non operating expense.
And we're focused on growth and I think growth is going to play a bigger role.
It has to and.
And then as regards whether or not that changes our stance on overall M&A activity you know our big concern on any class one merger is that in the S. T V's regulatory review.
They they they are committed to enhancing competition and there are also committed to taking a look at the downstream impacts of weather creates.
Incentives are an instability in the industry for further consolidation in that context, we see a lot of opportunity for our long term value impact that's not in our best interest. So we're gonna we're gonna be very very active and engaged in this process with the S. T D.
And.
Essentially directly with the acquirers and we're going to we're going to first and foremost focused on making sure that we protect our interest and then help the S. T D enhance competition as they see fit.
Okay. So it sounds like you've got some concerns around both transactions and you're not thinking about M&A as a.
In your near future.
Correct Scott at this point, we are not contemplating M&A, we've done plenty of work to understand what the costs are and benefits could be.
And we'll just continue to be engaged in and monitor the process.
Okay. Thank you for the Sox Lance appreciate it.
Next question is from the line of Chris Wetherbee with Citi. Please proceed with your question.
Hey, Thanks. Good morning, you know Lance wanted to pick up on some of your comments about some other long term growth potential I guess in the context of the competitive environment and the improvements that you Pee has been making under its P. S. Our progress over the course of the last couple of years can you at least maybe give us a little bit of a sort of preview of maybe how you're thinking about.
The growth opportunities for the franchise, if you'd go out maybe just beyond this year, but obviously, including this year. It seems like the macro is going to be a help to you but has service gotten to the point where maybe the.
Net of landscape in the western half of United States is you're getting a bit more favorable for you or does that sort of factor into your outlook. When you think about sort of the multiyear growth potential of the company.
Great question, Chris and thank you for asking it.
So when we think about growth there's a number of ways that we're able to attack. It one is opening markets to us that hadn't been opened before either through a more consistent reliable service product, which is true or a lower cost structure, which is also true. So we see clearly more opportunity happening.
There's another way to do it is to expand our reach.
And that can be done any number of ways. It can be done by our new intermodal terminal in Minneapolis. It can be done by a new trans load. It can be done by taking property that already exists surround the Dallas intermodal terminal and turning it into opportunity due to site new industry on it all of that is underway.
And Kenny maybe I'll ask you to make some observations that would give us a few examples of the kind of growth opportunities that you're achieving right now yeah. So I think so first of all Chris you know it really does start with the service product.
Eric and his team have done a really fabulous job of improving the service performance.
And it shows up in things like you know car velocity. So for example, as you look at our intermodal network is that velocity becomes more reliable and more consistent what we're able to compete right up there with truck on that domestic network. The same is true with parcel.
And then as you look at the Carload business you know the lower cost structure has really opened up market for us we're able to compete and have been able to win you know in the war value commodities are in areas like ball, we're able to access customers that may not have wanted to take large positions on either a fertilizer or a thumb.
Body by Green, that's been encouraging to Oh on the auto side, we've been really excited about new lines that we won that we are that werent. There in the past and then finally lay up as you talk about you know products help us all we talk about the product offering in Pocatello, what we're gonna be able to provide them.
Back opportunities for containers getting back to the way yeah Eric.
Kenny is something else, Chris that we haven't mentioned yet to two big drivers of near term wins, one is our technology base. Our technology platform you all know we rewrote our ERP over the course of the last number of years and it's a micro services architecture. What that means is a P is a really.
Easy for us to do we've already got something approaching four doesn't activate T is with our customer base. Those are helping us win business with you know electric vehicle manufacturers for instance that that really care about the data stream sort of technology platform is winning and then a R. E. S. G.
Our story is winning Theres a number of customers that are looking to us to help them reduce their carbon footprint and as you know that's becoming a much much more important part of the conversation with a number of our customers. So there's a lot of moving parts there, Chris and from our perspective, there's a lot of opportunity.
Yeah, Okay, great. That's great color appreciate the time thank you.
Thank you. Our next question is from the line of Ravi Shankar with Morgan Stanley. Please proceed with your question.
Thanks, John Miami, one lots if I can give you a one two part question.
First is on the guide I mean, obviously, you guys had a bit of a.
A tough circumstance here with the weather it is completely understandable in <unk>, but given the much stronger second half a macro outlook than three months ago did you consider kind of raising the guidance at all and also not to steal your Thunder from next week, but can you give us a sense of what we can.
Specced at.
At the analyst day in terms of broad topics that you may address.
Yeah, great. Thank you Robby. So you know we we do evaluate our guidance periodically of course every quarter is an opportunity and we've we've delivered what we think is a good prudent middle of the fairway.
A set of expectations as we look forward.
We're already kind of moving ourselves up in the range, which is meaningful 200 basis points of improvement is not chump change year over year, particularly when you're at the performance level that we were at last year at 58 in a house that's that.
That would mark us as being a very very strong industrial.
Performer, so so theres no more news on on the second half guidance I would also just remind you that there is there is some you know kind of very high optimism on what the second quarter. It's gonna look like just because the comps are so easy, but then when you get in the third and fourth quarter, we're starting to lap.
Now the real acceleration in domestic intermodal.
Intermodal, particularly the parcel world and we're also then starting to lap some of the real strength in grain. So it has yet to be seen exactly how that plays out but even in that context. Our guidance stands and then in terms of what to expect for our Investor Day next week. So what are you going to hear is you're going to hear us lay out.
Just what we talked about there we're going to we're going to lay out how we serve our customers and how that continues to improve and what to expect from us there.
And in real granular firms. So you can you can get a good sense of the of the work streams and what to expect Youre going to Youre going to hear us lay out how we expect to grow will named customers will we'll talk about very specific opportunity.
And work streams that you can hold us to account for we'll talk about what winning looks like in that context and kind of reaffirm of course guidance. This year and then we're going to talk about a couple of markers. We're gonna laid down for the next three years.
And then we're going to we're going to start with a with a nice overall context of how doing that together with all of our stakeholders.
It really comes to comes to reality. So we'll talk about our ESG story, we'll talk about what's going on with our employees. The communities that we serve because because I think that's a critically important part of how we run. This railroad we have a social license to operate in all 7300 communities, we serve and they need to hear us.
Us.
Talk about how much we value them and our relationship with them and how we keep it so you're going to hear all of that and you're going to see it in two hours and youre going to see the leadership team of Union Pacific tell that story collectively.
Excellent look forward. Thank you.
<unk>.
Our next question is from the line of Allison Landry with Credit Suisse. Please proceed with your question.
Good morning guidance I'm, just wanted to go back to the topic of service and growth and specifically the trip plan compliance I have to say that both the manifest and intermodal took a step back from from weather, but Eric I think you'd mentioned earlier, you know sort of needing to get and then manifests trip plan compliance back to that low to mid seventies Scott.
Is that really where you need to be longer term to start to chip away at.
The opportunity to convert some of that merchandise volume from the highway or do you need to be you know somewhere in the eighties, our nineties range to really be competitive with truck.
And then if you could just sort of help us through when when do you think you can get there or if that.
Could start to accrue in 2021 out of fixed more of a 'twenty two and beyond story.
I appreciate the question Allison. So my guidance today was really focused on the short term as we think about going into the second quarter net we're in right now and what the team is focused on was responding to in recovering trip plan compliance both on the intermodal and manifest in the auto side to your point into the discussion we've had so far this morning a growth.
I'm going to take a lot of different forms I remain completely open to the idea that as we continue to progress forward. Both in 2021 and beyond we're going to see opportunities to be able to grow that service product very intentionally broadly, but then also some growth opportunities will demand certain operations that we will continue to work with Kenny young as he finds those opt.
When we partner together to bring them on the railroad. So we have a complete dedication to growing TPC broadly, but then also remain very close with Kenny to ensure that we're providing the service in certain opportunities to continue to grow that business Hey, Eric Let me jump in as part of your question Allison was kind of a what should the thresholds b and.
Our experience at least right now and I would say into the near term tells US our trip plan compliance on the on the manifest sided about 75 ish plus or minus that or more is better but there is a threshold at which more cost more than its valued and then on the intermodal side, we do think high eighty's.
<unk> is kind of where that needs to park to be to be reliable and truck competitive.
Okay. So just to clarify on the matter of fact.
70, <unk> like Scott he found it absolutely D R.
Why do you reach the threshold.
Well, you just mentioned, but I'll start.
Low eighty's or should we think about the mid 70 Mark.
So Allison this it's not a hard and fast rule, if if you look backwards when our volume.
Volume goes away like it did in the second quarter, you can run a railroad really really smoothly and efficiently and get those numbers jacked up pretty good.
I would just say somewhere in the mid Seventy's is great for manifest.
If it starts creeping up into the mid eighties, even mid nineties, it's probably more service than than is valued and are not not the same in intermodal intermodal, there's an appetite for ninety's and they'll pay for it yeah look let me jump in real quick I just want to say what is critical here as well.
Liability part of it is that you know could predictably can get to that 75, and we can take that to the customer we can still talk to them about going after trouble crooklyn, because they know predictably that it's gonna be at 75, or 77 or 73 or whatever that number is.
Okay I understand thank you guys.
Next question is coming from the line of Brian Hudson Beth with J P. Morgan. Please proceed with your questions.
Hey, good morning, Thanks for taking the question.
One for Eric if you can just give us an update on this on the metrics through April here keep reporting on Kpis I think that'd be helpful to hear how things are moving on some other more detailed ones that you track and then just from a bigger picture perspective work force productivity is still pretty strong. Despite the challenges of the all time record last.
But how do you how do you view that in the context of some of the growth that you're mentioning a can that still improve independent of the growth and what the mix might look like and then if I can squeeze one in for Lance can you just give us an update on we're talking about labor on the train crew size negotiations I realize it's still early but we're seeing more about putting potentially a conductor on the.
<unk> are in the I guess the next few years, if and when that gets negotiated so if you can just bring us up to speed on what that means and how that's progressing that would be helpful. As well. Thank you.
Sounds good so if we looked at our slide four as our baseline. So you see on the left hand side, we can just start with freight car velocity.
It's showing 209 last seven day 218, a freight car terminal dwell so in 'twenty three five for the quarter our last.
Last seven days 22.6, so a very strong indications that we are out of that weather event, we're covering the system have recovered much of the system and then get back on the pace that we were before so strong confidence that we can do that.
You also asked about labor protein ripening, yeah. So on the labor productivity side and when we think about that two ways is there more opportunities to continue to grow that number absolutely. There is when we think about how do you make sure you're doing that you're really focused on are you getting the retention rate that you expect out of the people that are currently furloughed, we're sitting at 75.
Five to 85 per cent on that so we're still very effective at being able to obtain when we need to be able to bring out people for growth and at the same time, our total furloughed count on the T. N Y side is 1400, so there's a strong pull there to draw upon so no concerns at this time and then I'll build off that that labor productivity commentary to answer.
Your labor negotiation question, Brian, which is we are right in the middle of National round, it's been underway for over a year.
The railroads are pursuing a crew size changes in the cab of the locomotive if successful that would put one other individuals on the ground servicing more than one train. We think that's got a lot of positives to it first and foremost as a as a lifestyle improvement for half the cabinet of locomote.
In that circumstance one of the most difficult parts of being a train and engine men on the railroad is that their work schedules are unpredictable. They match the flow of trains, which are 20 $473 65, if we can put somebody on the ground. We can create that work into shift work and scheduled shift work.
Which is a real benefit there are other benefits of course, that's a real productivity move, but that's far from certain that we'll be able to get that in this round. We're pursuing it of course, it's got to be negotiated.
Thank you, Eric and Lance I appreciate it.
Yeah.
The next question is from the line of Kenny extra with Bank of America. Please proceed with your question.
Hey, great. Good morning, just a follow up on a couple of questions out in the first quarter, you said last year or first quarter up 46% carload target for the year.
Moving to the top end of that but it's if Kenny you mentioned IP up 200 basis points. Since you set that target or do you still see yourself as being conservative by staying in that target or are there any losses, we need to consider and in share.
And then Scott to meet that just to follow on the last question. Your employee changes maybe Jack you can throw at me down 12 per cent what your thoughts are on unemployed by yearend.
Let me take the conservative or not conservative question, if I could.
The short answer is no I mean, 4% to 6% was our best thinking before 6% our best thinking now we'll keep tuned up on it we've talked about the potential headwinds are late in the year.
But yeah, it's our best thinking and I would just add to that kind of similar to some of the commentary. We're also starting in a little bit worse off than we anticipated when we laid out our guidance for Ya man or income we had a tougher first quarter and how things are actually played out with what happened with weather. So.
But to your head count question can a in terms of how we see that playing out you know where it you know call. It just shy of 30000 employees. Today are we think that we should be able to even at the high end of that range kind of keep steady state relative to those you may see some ups and downs a little bit we may actually have to do a little bit of hiring and some small low.
Patients if we if we don't have have been adequate crew base there you heard Eric.
Eric referred to the 1400 furloughs, but we plan on being very efficient with with the crew base and so we think I'm, even up to that high end of the range that we gave the 6% we should be able to keep that pretty flat with some little seasonal fluctuation.
Great I appreciate the thoughts thanks, John Thanks, Mike.
The next question is coming from the line of friend and negotiate with Barclays. Please proceed with your question.
Hey, good morning, everyone and thank you for taking my question. So I guess I want to follow up with the kittens question. There you know lance or Eric or maybe even Jennifer with you know we're trip plan compliance is where you wanted to get it.
It just feels like a repetitive seen when rail volumes come back historically, you know, we see not just union Pacific, but industry service metrics really lag. So I guess what can be different. This time that you think you can do it with such a lower resource space because I think historically you know the answer was always throw more locomotives.
Motives assets employees that itself.
Yeah. That's a great question, a very fair question Brandon what's different for US is a demonstrated track record now in the in our world of P. S. R where when volumes return we don't crater a case in point perfect. Great case in point is last year last.
At year volumes dropped as dramatically as we've ever seen in our recorded history from a call. It you know late February early March into April and then subsequently recovered as fast as we've ever seen and if I recall in the recovery period from Q2 to Q3 to Q4.
We continue to improve our metrics on service that's a proof statement right now when you go from 120007 days to 160007 day at the end of the year now clearly you're loading resources into a pretty empty network at that point, but you're still having to do the work of loading resources into the network.
I think the same is true right now I'm gonna make up a number if we go from today's volume to 180007 day, we've got a network of physical franchise that can handle that pretty readily and the job would be to efficiently layer in the train starts that would be necessary to cruise look.
Motives and we've demonstrated we know how to do that and should be able to do that Eric Little Technicolor, Yeah, and one of the greatest tool to do that as all of our continued efforts on train length as you know.
As we reported this morning were up 10% 850 feet, but when you're thinking about the service product and being able to deliver that the one of the best tool. You have is a very fluid network as we think about two and a half years ago. We would have had 800 ish trains running around in any given day now we're at 600 and 605 a day, that's 25% less.
<unk> potential variability events, which is the primary driver for any degradation and trip plan compliance so continuing to leverage train length on top of how we operate and our terminals both key opportunities to consistently drive that number up to that mid 80 number.
Thank you.
Yeah.
The next question is from the line of John Chappell with Evercore ISI. Please proceed with your question.
Thank you good morning.
Kenny you noted the tight truck capacity and the favorable outlook for taking share off the highway beyond the weather you know the west coast congestion issues still seem to be in the headlines and you know the rail seem to be getting thrown at the bus a little bit as part of the problem not the solution can you just speak to the progression of clearing some of the backlog, especially as it were.
Weighted to the West Coast ports, and then also what's your capacity to actually take advantage. Then of this favorable you know competitive dynamic that you have from a cost perspective.
Yeah.
We've seen the same headlines you are reading.
I'll start and then Eric Howell.
She finished and then pitch it back to me to talk about the other about an opportunity but.
Look when you look at the Port congestion that's going on there are there is a lot of players in that supply chain.
I can't really quote conversations with a lot of other ocean carriers and even the port here.
Here recently.
Let me just break down a few things one we know about the increased demand that has a pretty sudden but one other things that you look at another variable that you look at is the warehousing capacity go in a lot of cases, the warehouse or warehouses out there or just the pool. They are unable to physically take the container.
But we are seeing old container.
I'll, let Bob there on the Port there are some challenges on the dray side certainly some labor issues at the at the terminal and then you look at the trucking capacity to even go long haul there is tightness there, though what we're focused on here is what we can't control and Eric If you wanted to talk about what we're doing from an operational staff.
Sure John I appreciate the question because the Union Pacific is a critical component of that entire supply chain Kenny was mentioning so when we look at being able to ensure that we have the resources up against that we're always looking at how what's the total footage of trains that we're able to depart from the L. A basin specifically out of I C. T F and so if we go back in time from.
July to October last year, we had 60000 feet of capacity now as we saw that volume continue to increase we were intentional and ahead of time increase that to 68000 in the middle of November and then actually again in April 1st of this year, we took that to 80000.
On top of and driving a 25 per cent increase in our train starts out of the L. A basin also to support that growth. So you'll see I hope you see Union Pacific as the component in that process, that's doing everything they can to bring on that volume and efficiently get it out of the L. A basin and into the inland Empire inland terminals, which helps the <unk>.
Overall fluid a day with the entire supply chain.
So Jim just the cold out here, John we feel good about the incremental wins that we're seeing on the domestic side. It is a tight.
Tight market, because we're going through bid season, we feel encouraged by.
By some of the past wins on the international intermodal side, so as we move throughout the year, where flow and go and very optimistic about the marketplace.
Okay. Thank you Kenny.
Okay.
The next question comes from the line of Tom <unk> with UBS. Please proceed with your question.
Oh, Yeah. Good morning, I wanted to go back a little bit to the some of the consolidation question.
<unk> said you know I think your comments this morning and in the past has been kind of cautious about rail consolidation.
Are you essentially again consolidation would you say, we just we just don't think it should happen.
Or is that kind of overstating it and then in terms of Gateway I mean, obviously, you do a large amount of business at the Laredo Gateway how.
How do you protect yourself yeah.
C. P. R C young get Kiss you.
And there's some essentially bridge traffic are.
Do you have some from Laredo to Chicago.
That would potentially be at risk. So how do you think about you know what you need to do to protect yourself at that gateway.
And Tom Good morning, and thanks for the questions.
You know we've been very clear on consolidation you mentioned at all we think that the process. The S. T. V is committed to undertake in terms of reviewing any class one merger to insure it both enhances competition.
It has better outcomes for all customers.
And that they are contemplate the downstream impacts when you boil that all together and note that the STB has full authority to put in whatever remedies and regulations are required to achieve that we've always thought there's a lots of opportunity in that to destroy long term value for the industry. That's our big.
Conservative.
We are constantly.
Evaluating long term enterprise value creation a.
Part of that is whether or not mergers make sense for us and that's always been our primary sticking point, we'll have to navigate this current process to see how it comes out and of course, we'll be an active participant in it.
Related to the second part of your question, which is how do we protect or how do we ensure that the competitive option that the U P represent doesn't.
It doesn't get a disadvantage by either the CP or the C. N. If they were to own K C. S.
You've got it exactly right the Laredo gateway as the primary gateway for the K C. S. Casey S M and we'd have to do two things we'd have to make sure that operationally, we're treated fairly and equitably at the gateway and then we'd have to make sure commercially that we're treated fairly and equitably to all the points that we currently have in.
<unk> to serve with our franchise in the United States are in in conjunction with the K C. S M and our franchises damn good it's the best in the industry.
And that's why we represent about two thirds of all rail cross border traffic to and from Mexico. It would be a crying shame and it would be against what the STB is as committed they would do with it in evaluating a merger if that excellence is replaced by something that's inferior.
And it's because we're disadvantaged so we'll be crystal clear about that in front of the STB and in the process.
Okay, but you think there are willing to protect the franchise at Laredo.
Yeah, 100%, there are and they would be impositions concessions remedies that would flow through the S. T D.
Great. Thank you Lance thanks for the perspective.
Our next question is from Atlanta, Cherilyn Radbourne with TD Securities. Please proceed with your question.
Thanks, very much and good morning.
Just wanted to ask a slightly different question regarding the capacity challenges on the West Coast I was just hoping you could comment on what you've done to protect service for customers and our mutual commitment program and what do you expect to see more interest in that program going forward just given the capacity challenges across.
All votes.
Yeah, Thanks, Cherilyn I I mean.
Clearly, we will announce that and have taken the action to protect those customers that are in the program and we're doing that with a <unk>.
A lot.
Quicker responsiveness as we see the market changes as we see the supply chain tightened.
Titan, we will take those actions and European us too that we're in constant communication with our customers and helping and talking to them about their supply chain does it relates to the street time as it relates to dwell on what they're doing with their a b C O or an individual customer.
We're going beyond just.
Having that surcharge out there and talking with our customers about what they can do to make sure that they can efficiency efficiently utilize those assets.
And do you expect to see more interest in that program going forward, we have not seen any of that waiver and we would expect the entrants to be there and be strong.
Thank you that's all for me.
Sure Linda.
The next question is coming from the line of Walter <unk> with RBC capital markets. Please proceed with your question Hey, Thanks very much. Good morning, everyone. So just following on that question with regards to congestion and then.
If we do see a very significant increase in in an economic activity potentially.
Potentially above and beyond what is currently expected.
How much of your ability to to to protect services within is outside of your control in other words.
What can you do here to speak to your supply chain partners to make sure that.
That everything remains fluid and how much of a risk is that.
And just as a follow on question there on yields.
I think you mentioned that yields were going to be negative for the year.
And and I'm, just curious with everything going on with that demand and the potential pricing opportunities are you still expecting yields to be negative for this year.
Let me start on both and then I'll turn it over to first probably Kenny and Eric.
To comment on specifics about congestion and how do we avoid it.
I don't think we've said anything about negative yields in the year. Jennifer now we said the business mix is expected to be negative right, but not the overall yield. So when you think about yields obviously, there's numerous components. There's the mix impact, there's which we do expect there's going to be pressure, probably going to look a little bit better here in the second quarter and third quarter of price pressure in the fall.
Quarter with some other grain comps.
But in terms of pricing and feel very good about pricing and then fuel surcharges. You know this is the last quarter, where we've got a pretty negative comparison year over year relative to fuel prices and.
And surcharges and so that should look better over the balance of the year as well yeah I'm sorry. It was Walter said yields I went to how we define yeah, yeah predominantly price at the price.
So so while they were talking a little bit about congestion and if economic activity surprises us and is even stronger and continues to strengthen what are we going to do about avoiding congestion and the short answer is I'm, making sure that we've got the right resources against it staying ahead of it through the.
Kenny and his team in terms of translating economic activity into carloads for us.
Which we do routinely and periodically to try to stay upfront.
And I also need to make sure.
We talk Kenny N and Eric both talked about us, having a full supply chain visibility and working towards that specifically with the west coast ports. That's an active engagement, whether it's in the L. A basin or up in the PNW on our part to make sure that we are in the into.
Higher supply chain have transparency and visibility into what's happening what the metrics are in K P. R kpis needed to be for us to stay fluid and support an excellent service product.
And from my perspective, that's not just about satisfying current demand and that's about making sure that the west coast ports are competitive in a very very competitive world, where stuff can hit Prince Rupert or the Gulf coast or the East coast, Eric I'll take on the resources.
The visibility so when you think about Walter the resource base, when you're talking about three things you're talking about locomotives. So obviously, we have reported that we have a 3000 plus locomotives in storage, but we also more importantly to respond to that growth as we have are at the ready locomotives that are actually pre placed out in geographical areas like the L. A basin.
So we can be very agile in responding to that from a car perspective.
We don't have any constraints on that now as Kenny mentioned earlier, you're trying to drive intermodal velocity higher and higher which just allows you to turn the cars faster and provide you even more at the readies for cars as well and then crew base wise.
Still use the same process. We use every single month to evaluate crew demands, let's see as Jennifer mentioned, there may be sporadic hiring some of that may be in the L. A basin, but no immediate concerns on cruise and then finally, it's the agility for decision, making when I talked about increasing the train counts on the L. A basin by 25 per cent that was a decision we started on Monday.
Wednesday, we're already moving the resources there to answer that call. So.
I feel very comfortable on the operating side, yeah, just to add to that we stay very coordinated with the customer on.
On what they plan to do on what their forecasts are and.
We're in turn taken that in sitting down with Eric and so he talked about the adjustments that we've made we've got visibility just talking to our customers from that perspective.
Obviously here this year, we've made some changes to our Apple to Oreo charges to incentivize our customer to.
Get the equipment moving you know, regardless, whether it's our equipment or their equipment, we are sitting down with our customer to <unk>.
Talk about efficiency, and turn times and dwell and things they can do to get the network moving so boy, we feel really good about the visibility there and the coordination there and decisiveness there to keep the network fluid.
Okay, I appreciate that and just to clarify I was referring to the free.
Are there where it was negative two 5% in the first quarter I think Jennifer you had indicated that it would the business mix would keep that kind of negative for the full year and that was what I was asking about but.
It sounds like you answered that so thats great. Thank you.
Thanks Robert.
Our next question is coming from the line of Jordan Alger with Goldman Sachs. Please proceed with your question.
Yeah, just a follow up on the revenue per carload yields I D.
Yes.
Sufficient to move that into the positive territory as soon as the second quarter or is it more second half and then just.
Yeah, I think you've mentioned biofuels out or at least a couple of quarters I'm, just curious of that opportunity now and perhaps the scope and size of that opportunity down the road.
So Jordan this is Jennifer.
Second quarter. It should look better you know last year's second quarter was obviously with the pandemic are greatly impacted especially with the auto production, which was virtually stopped now we do still have some other production headwinds. This year, that's a little bit of a headwind, but we're expecting it to look better rather it will turn positive in the second quarter are you know I think that is really going to.
Dependent on the mix, but we feel good about the direction that things are going particularly in the back half yeah. So biofuels, we've been very encouraged with where we are today with that and we're even more encouraged with where we see it by the end of the year and long term, we do see that our renewable diesel.
Have a had legs, we've been working with customer for land sites on our network and we feel really good about that we've talked to them.
A growing number of customers that are interested and have committed capital dollars to investments, but we know it's real so.
That's why you're seeing that optimism there from us on the Biofuels endpoint.
Thank you.
Okay.
Our next question is coming from the line of Justin Long with Stephens. Please proceed with your question.
Thanks, and good morning.
Lance following up on the topic of growth in some of the tailwind that you mentioned do you think volume growth above GDP is something that's achievable longer term for the business and if the answer to that is yes is this something that can happen without negatively impacting mix because I'm guessing a lot.
The truckload conversion opportunity is coming in intermodal.
<unk>.
Yeah, It's a great question Justin.
So the short answer is we believe we can grow faster than our served markets.
GDP Knight might not be the best measure right, because there's a boatload of services embedded in GDP.
But but maybe instead you'd have to look at the elements of industrial production. The one copy of that I'd give you is that's going to be true.
We expect that to be true and be able to drive that.
With the exception of a handful of commodities coal being one of them.
<unk>.
Perhaps petroleum being another wanted maybe frac sand in the non U.
You take those off the table and our expectation is we grow at a better rate than our served markets.
And I would just say to the mix question, we're gonna grow profitably I mean, we expect it to be able to when we recognize that that's a dynamic that we have in our business today, but.
But we don't.
See that as being a hindrance to us being able to improve our profitability through.
Through ongoing efficiency through price into the services that were provided in the marketplace. So that's all kind of baked into how we're looking at the future and obviously, we'll talk more about that one day for it.
Great I appreciate the time.
Hey, Justin.
The next question is coming from the line of David Vernon of Bernstein. Please proceed with your question.
Hey, Good morning, Lance you know one other thing that stands out in these two are competing bids for KSU has this opportunity to convert highway traffic either from the Laredo gateway or the Texas area, perhaps down into my even as far down into Mexico up into the Midwest now as you look at that intermodal opportune.
That truck conversion opportunity would you agree that that that is a huge potential market and if so what are you guys doing to actually capitalize on that short of a merger and what can you do to kind of catalyze some of that growth because it seems like there's a lot of of truck competitive traffic in that corridor and if these two carriers are saying.
Now is not being converted today, because there isn't a merger like how do you think about getting after that opportunity.
Thank you David so let's.
Let's start with the potential there is a lot of truck traffic that can be converted to.
Rail and we're constantly working with both the FX day in the K C. S M to try to get that done.
We have been successful in and actually growing our overall intermodal product that we call. It the domestic intermodal product, even though it's to and from Mexico, and we expect to continue to do that now it's pick and shovel work right because we've got to get the FX theory of the case, yes, I'm interested in a move that.
Might be relative short haul for them.
In comparison to what they might be able to do just staying within Mexico. If that's the case, there's always an opportunity to use truck in Mexico, as the origination or destination and trans load at the border. It's a little more complex, but we do that today and we can continue to do some of that.
So yeah, the market's big it's pick and shovel work to convert and you know there's been plenty of advertising about the the potential to convert and what it means and synergies we have not seen the game plan that would be required to be filed with the S. T D.
And once we see that game plan all of US then can start evaluating how real is it and is it going to be done at our expense in which case, there's gotta be a remedy that maintains our competitive posture.
And then maybe just as a quick follow up to that if you look at the the routing on on your railroad of the preserved Pacific why not a laredo up into the Midwest. That's always been the I think the least circuitous riding out there and I was just wondering for the rail traffic that's coming over that corridor I'd imagine customers have a lot of day on the routing.
So just because there's another way to kind of move it up a different route that's out of routes I mean, what role customers play in sort of determining the routing on some of that carload traffic that would help us assess kind of the diversion risk there cost cut.
<unk> is at the front and really don't play that greater role with what what we deal with a customer when were bidding for business as we determined the best route for the service product, that's what we sell to the customer sometimes its blind to the customer and we routed as long as we're maintaining the service commitment to the customer.
Sometimes the customer has a full understanding and appreciation for the routing and if we want to change it it becomes a little bit more complex, but net net.
At the front end of any transaction we as.
Railroad determined the best routing.
And that's always with an eye towards the best service product that meets the needs of the customer that's what gets problematic inside a potential acquisition as you know the the combined carriers might have the opportunity to go to an inferior routing through commercial construct.
And it's not the best for the customer it's not the best for the market.
Thanks, a lot for same day.
Thank you.
Our final question is coming from Atlanta, If Jason Seidl with Cowen. Please proceed with your question.
Thanks, Operator, and then Lance and team. Thank you for taking this Kenny maybe one for you on other automotive side I mean, obviously, that's a question Mark he does have up there going forward clearly that's going to depend on the ability to get the chips.
And manufacturing back up but you know once that is back up and running you know what should that backlog look like.
So you guys about what should we expect on the volume side in the second half of year and maybe into the first half of 'twenty two.
You know you were talking about international intermodal non automotive automotive, yes, it if the.
The demand is there we expect that demand are adjacent to be strong for the rest of the year, so going into peak season. So the overall demand will be there you've heard us talk about some other wins in the international intermodal volume you've also heard Eric talk about what we're doing to our service.
Customers out there so we are encourage.
What the demand structure, there with our ability to compete and as the supply chain smoothed out a little bit and when I say that I mean.
All of the warehouses.
Street time that should also open up the velocity for us to move more volume.
So your Congress Scott.
And the premium service that in the back half of the year and then into 'twenty two but its it's just a question mark on just how quickly it's going to come back.
I am not a good way to say Ajay and I feel confident about the.
Demand on the international intermodal side.
Okay I appreciate the time as always.
Thank you Jason.
Thank you.
There are no additional questions at this time I will now turn to flow to Mr. Lance Fritz for closing comments.
Thank you Robert and thank you all for your questions. Just a reminder, we have an upcoming virtual investor day on May 4th at two P. M Eastern time.
We're all looking forward to discussing our strategy and vision for Union Pacific and we hope you're going to be able to attend with us.
Wish you all good health and take care.
Thank you and this will conclude today's conference you may disconnect. Your lines at this time. Thank you for your participation.