Q1 results were 'solid' despite network congestion, UP says

Today, Union Pacific Corp. announced its first-quarter net income totaled $1.3 billion — or a Q1 record $1.68 per diluted share — compared with $1.1 billion and $1.32 per diluted share, respectively, in first-quarter 2017. Diluted earnings per share jumped 27 percent year over year.

The Class I's other financial results for the quarter show operating revenue rose 7 percent to $5.5 billion, operating income climbed 8 percent to $1.9 billion and the operating ratio improved 0.6 points to 64.6, although higher fuel prices negatively impacted the ratio by about 0.2 points, UP officials said in a press release.

Agricultural products revenue was flat at $1 billion, but energy revenue grew 15 percent to $1.2 billion, premium (domestic/international intermodal and finished vehicles) revenue rose 7 percent to $1.5 billion and industrial revenue increased 6 percent to $1.3 billion compared with first-quarter 2017 results.

Quarterly freight revenue climbed 7 percent to $5.1 billion, with volume growth, increased fuel surcharge revenue, core pricing gains and positive mix all contributing to the gain, UP officials said. Carloads increased 2 percent in the quarter to 2.1 million units.

Meanwhile, operating expenses increased 6 percent to $3.5 billion, primarily because fuel costs shot up 28 percent to $589 million and the railroad incurred expenses associated with operational challenges, such as increased training for additional train, engine and yard employees. The challenges resulted in about a $40 million headwind in the quarter, UP officials said.

"Our solid first-quarter results were a direct reflection of the tremendous effort put forth by our entire workforce, and had it not been for some network congestion it would have been even better," said UP Chairman, President and Chief Executive Officer Lance Fritz. "I am encouraged by the work we are doing to quickly regain superior levels of service and efficiency."

That work includes more aggressively managing freight-car inventory, adjusting the transportation plan — such as by shifting volumes to balance car flows — and improving efficiency at key terminals. The railroad also has reactivated about 650 high-horsepower locomotives since mid-2017 and is leasing additional locomotives.

“We are pleased with the improvement we have seen in recent weeks and are confident in the plan we have in place to continue building on the progress already made," said Fritz. "With the economy favoring a number of our market segments, we are well positioned to benefit from another year of positive volume growth and solid core pricing gains."