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Despite weak domestic coal demand, sluggish export grain volumes and still-high fuel costs, Union Pacific Railroad set six records in the first quarter. Among them: operating revenue climbed 14 percent to a quarterly record $5.1 billion; operating income soared 33 percent to a best ever $1.5 billion; diluted earnings per share jumped 39 percent to a first-quarter record $1.79; and the operating ratio (OR) dropped 4.2 points to an all-time-low 70.5 compared with first-quarter 2011 figures.

UP drove across-the-board strong financial results in the quarter because of the Class I’s diverse franchise, high-quality service and productivity, said Acting President and Chief Executive Officer Jack Koraleski during an earnings webcast and teleconference held this morning. Koraleski, who assumed the top post in early March after Chairman Jim Young took a medical leave, also thanked listeners for their support of Young and his family as he continues treatment for pancreatic cancer.

Volume in the quarter inched up 1 percent year over year to 2.2 million units. But volume would have risen 4 percent excluding a large dip in domestic coal carloads, said Executive Vice President of Marketing and Sales Eric Butler, adding that Southern Powder River Basin tonnage fell 8 percent and Colorado/Utah tonnage declined 3 percent.

Overall, energy revenue increased 5 percent to $995 million even though volume decreased 8 percent to 495,000 units. Agricultural products revenue rose 6 percent to $858 million but volume fell 2 percent to 234,000 units largely because export grain traffic plunged 39 percent to 52,100 units, said Butler.

In the other four sectors, automotive revenue climbed 26 percent to $430 million and volume jumped 15 percent to 180,000 units; chemicals revenue rose 16 percent to $768 million and volume increased 8 percent to 241,000 units; industrial products revenue soared 25 percent to $863 million and volume rose 10 percent to 290,000 units; and intermodal revenue climbed 15 percent to $909 million and volume inched up 1 percent to 778,000 units.

In terms of costs, first-quarter operating expenses rose 7 percent to $3.6 billion primarily because of fuel, which accounted for one-third of the year-over-year increase, said EVP and Chief Financial Officer Rob Knight. Fuel costs jumped 12 percent to $926 million as the average diesel price per gallon increased 12 percent to $3.23. Compensation and benefits expenses rose 4 percent to $1.2 billion as headcount increased 4 percent to 45,642. Work associated with positive train control accounted for half of the headcount gain, said Knight.

Looking ahead to the remainder of 2012, UP expects full-year record earnings and a record OR because of top-line growth opportunities, solid pricing and a continued focus on productivity, he said. Strong demand in the chemicals, intermodal and automotive sectors, as well as traffic driven by high activity at various shales will help offset weak coal and export grain carloads, Knight added.

— Jeff Stagl