UP surpassed four all-time-high financial marks in 3Q

The last publicly traded Class I to report its third-quarter financial results has something in common with the five large railroads that already shared their results: new records. Union Pacific Corp. today announced it set four all-time quarterly financial records in the quarter.

The new high-water marks are $1.53 for diluted earnings per share, which climbed 23 percent on a year-over-year basis; $6.2 billion for operating revenue, which rose 11 percent; $2.3 billion for operating income, which jumped 19 percent; and 62.3 for the operating ratio, which improved 2.5 points from third-quarter 2013's mark and bested the previous all-time quarterly record of 63.5 set in the second quarter by 1.2 points. Analysts had expected 3Q earnings of $1.51 per share and revenue of $6.1 billion.

In addition, UP reported that freight revenue grew 11 percent to $5.8 billion, net income soared 19 percent to $1.37 billion and volume rose 7 percent to 2.5 million units.

The Class I registered nearly across-the-board volume and revenue growth, with volumes holding strong through the quarter, said UP Chief Executive Officer Jack Koraleski during the railroad's earnings conference this morning. UP leveraged the strengths of its diverse franchise to handle the strong volume growth, he added.

The Class I posted revenue and volume gains in five of its six business groups, with agricultural products leading the traffic growth with a 14 percent year-over-year increase to 239,000 units. Grain volume ballooned 34 percent to 85,700 units, helping to boost ag products revenue 19 percent to $915 million.

Automotive revenue ratcheted up 3 percent to $527 million and volume rose 5 percent to 204,000 units; chemicals revenue increased 6 percent to $936 million and volume inched up 2 percent to 288,000 units; industrial products revenue climbed 19 percent to $1.16 billion and volume jumped 12 percent to 363,000 units; intermodal revenue soared 15 percent to $1.18 billion and volume rose 10 percent to 936,000 units; and coal revenue increased 2 percent to $1.1 billion while volume was flat at 466,000 units.

In terms of operating costs, total expenses rose 7 percent to $3.8 billion as compensation and benefits costs climbed 8 percent to $1.3 billion, fuel costs increased 2 percent to $882 million, and purchased services and materials costs went up 11 percent to $650 million. UP's headcount increased 2 percent in the quarter to 47,550.

Based on 3Q performance, the railroad is solidly positioned to achieve a sub-65 operating ratio for the full year, said Executive Vice President and Chief Financial Officer Rob Knight. There also is "tremendous opportunity" across UP's diverse franchise going forward while the railroad remains focused on improving network velocity and fluidity to leverage those opportunities, said Koraleski.

"We are optimistic about the remainder of the year," he said. "Assuming the economy and weather cooperate, we are well positioned to finish up the year with record results."