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The second Class I to report third-quarter financial results marked a few firsts during the period. Union Pacific Corp. set all-time quarterly records for operating revenue at $4.2 billion (up 5 percent), traffic volume at 2.52 million units (up 1 percent) and operating ratio at 76 (a 5.1-point improvement).

The volume increase followed a 3 percent decrease in first-half revenue carloads, which totaled 4.8 million units.

"We expect volume to be down 1 percent at the end of the year, making up a little ground from the first half," said Executive Vice President of Marketing and Sales Jack Koraleski during UP's earnings conference held this morning.

Revenue increased year over year in five of six categories: agricultural products (12 percent), chemicals (9 percent), energy (8 percent), automotive (7 percent) and intermodal (3 percent). Industrial products revenue totaling $795 million decreased 4 percent. The chemicals, energy and intermodal segments set all-time revenue records at $587 million, $827 million and $769 million, respectively. In addition, revenue per carload rose 5 percent year over year to $1,584.

UP also reported third-quarter operating income of $1 billion, up 34 percent, and net income of $532 million, up 27 percent compared with third-quarter 2006. Quarterly expenses dropped 1 percent to $3.19 billion.

The railroad posted stellar results primarily because of operating efficiencies derived from several initiatives, including process-improvement driver the Unified Plan, UP executives said. Train starts decreased 5 percent and train lengths increased across the board about 6 percent, said EVP of Operations Dennis Duffy.

"We're seeing the initiatives kick in and efficiencies come on," said Chairman and Chief Executive Officer Jim Young.

UP execs expect similar results in the fourth quarter, which won't be as soft as 2006's, they said. Revenue will increase 5 percent and the operating ratio likely will range from 78.5 to 79, said EVP and Chief Financial Officer Robert Knight.

"The operating ratio tends to trend up from the third quarter to the fourth quarter," he said.

— Jeff Stagl