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Today, Union Pacific Corp. reported record fourth-quarter financial results, which capped off the most profitable year in the railroad’s 150-year history.

The records include operating income, which climbed 31 percent to $1.3 billion; net income, which jumped 41 percent to $775 million; diluted earnings per share, which soared 44 percent to $1.56; and the operating ratio, which improved 3.2 points to 70.2 compared with fourth-quarter 2009.

In addition, operating revenue increased 17 percent to $4.4 billion and traffic volume rose 9 percent to 2.2 million units. Analysts polled by Thomson Reuters had expected quarterly earnings per share of $1.48 and revenue of $4.35 billion.

UP now has logged three consecutive quarters with operating income exceeding $1 billion and volume gains in all six of its business units, said Chairman, President and Chief Executive Officer Jim Young during an earnings webcast and teleconference held this morning.

Agricultural products volume rose 6 percent to 248,000 units and revenue increased 14 percent to $840 million; automotive volume inched up 3 percent to 155,000 units and revenue rose 7 percent to $323 million; chemical volume climbed 10 percent to 211,000 units and revenue increased 14 percent to $617 million; energy volume went up 4 percent to 519,000 units and revenue shot up 16 percent to $887 million; industrial products volume soared 23 percent to 263,000 units and revenue jumped 27 percent to $652 million; and intermodal volume rose 10 percent to 841,000 units and revenue climbed 25 percent to $852 million.

Strong demand for coal in the southern Powder River Basin, where UP’s volume increased 8 percent year over year, helped drive energy traffic while improved consumer demand and truck diversions helped drive intermodal business, said Executive Vice President of Marketing and Sales Jack Koraleski. International intermodal volume jumped 15 percent and domestic volume rose 4 percent.

The lone drag on UP’s quarterly financial performance: operating expenses, which increased 12 percent year over year to $3.1 billion. Compensation and benefits costs rose 9 percent to $1.1 billion, with one-third of the increase attributable to wage and benefit inflation and another third to volume growth, said EVP and Chief Financial Officer Rob Knight. In addition, the workforce increased 3 percent to 43,500 vs. fourth-quarter 2009’s level.

Fuel costs jumped 27 percent to $687 million as the average diesel price per gallon rose 20 percent to $2.46, the highest average price in two years, said Knight.

For the full year, UP set the following records: operating income, which soared 47 percent to $5 billion; net income, which climbed 47 percent to $2.8 billion; diluted earnings per share, which ballooned 48 percent to $5.53; and the operating ratio, which improved 5.5 points to 70.6 compared with 2009. Operating revenue jumped 20 percent to $17 billion and operating expenses rose 11 percent to $12 billion.

In 2007, UP set a goal of reducing its annual operating ratio to the low 70s. Since that objective has been achieved, the Class I is focusing on a new goal of lowering the ratio to a 65-to-67 range by 2015, said Knight.

In the meantime, UP is expecting more financial growth in 2011, said Young.

“Economic indicators point to growth, and if jobs improve, there will be even greater strength,” he said. “The bar is raised, and last year the floor was set. We’re setting our sights even higher.”

— Jeff Stagl