Union Pacific reported record first-quarter financial results despite carrying slightly less freight than a year ago.
“We had a strong first quarter and start to the year. Our network is running well, and we are delivering on commitments to our customers,” Chief Executive Jim Vena said on the railroad’s Thursday morning earnings call. “When you put it all together, we are doing what we said we would, leading the industry in safety, service, and operational excellence.”
Operating income rose 4%, to a record $2.45 billion, as revenue increased 3%, to a record $6.2 billion. Earnings per share was up 6%, or 9% when adjusted for the impact of one-time items.
The railroad’s operating ratio was 60.5%, a 0.2-point improvement compared to a year ago. The adjusted operating ratio was 59.9%.
Overall volume declined 1% for the quarter, driven by a 9% slump in premium traffic, which includes intermodal and automotive business. Domestic intermodal, however, had its third straight record quarter, said Kenny Rocker, the railroad’s executive vice president of marketing and sales.
Industrial products volume increased 4%, while bulk traffic was up 12% thanks largely to higher grain and coal shipments.
The railroad’s key operations metrics improved for the quarter, with freight car velocity, locomotive productivity, workforce productivity, and train length all at record levels. UP’s train accident and employee injury rates improved for the quarter as well.
“Freight car velocity increased 9% to 235 miles per day. This performance was driven by best-ever terminal dwell of 19.7 hours, 11% better than last year and our second quarter below 20 hours,” said Eric Gehringer, executive vice president of operations. “Every day, we continue to challenge ourselves to find new and innovative opportunities to reduce car touches, leverage existing technology in our terminals, and implement new technologies.”
UP (NYSE: UNP) was able to reduce its active locomotive fleet by 4% in the quarter despite a 4% increase in gross ton-miles.
UP now has a positive outlook for its bulk and industrial products business segments for the remainder of the year. The intermodal outlook is negative due to lower imports and international traffic, while the automotive outlook is neutral as softer vehicle sales are being offset by the railroad landing a BMW contract.
The spike in fuel prices since the Iran conflict began will put pressure on the railroad’s profit margins in the second quarter, Chief Financial Officer Jennifer Hamann said. The railroad is paying over $4 per gallon for diesel fuel this month.
Fuel surcharge revenue will eventually offset the rise in fuel prices.
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