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Rail News: Union Pacific Railroad

UP sets revenue and carload records, lowers operating ratio in second quarter

After a solid first quarter, Union Pacific Railroad officials were hoping the Class I could continue to boost financial performance in the second quarter and get 2006 off to a strong first-half start that didn’t materialize in 2005. They got their wish — and then some. In several ways, the second quarter was UP’s best ever.

Quarterly operating revenue reached a record $3.9 billion, up 17 percent, and commodity revenue totaled an all-time-high $3.7 billion, also up 17 percent compared with second-quarter 2005. In addition, UP boosted revenue carloads 5 percent to a record 2.5 million units.

“For the first time, we moved 200,000 carloads in a seven-day period,” said UP President and Chief Executive Officer Jim Young this morning during the railroad’s second-quarter conference. “And we’re closing in on $4 billion in quarterly revenue.”

The railroad also increased net income 67 percent to $390 million or $1.44 per diluted share, boosted operating income 53 percent to $717 million and improved its quarterly operating ratio 4.3 points to 81.7 — UP’s best ratio in more than two years — compared with second-quarter 2005.

However, operating expenses totaled $3.2 billion, up 11 percent compared with the same 2005 period primarily because material and supply costs rose 39 percent and fuel and utility expenses increased 33 percent. UP paid an average quarterly fuel price of $2.15 per gallon compared with $1.67 in second-quarter 2005.

During the first half, operating revenue rose 18 percent to $7.6 billion, net income jumped 94 percent to $701 million, operating income climbed 69 percent to $1.3 billion, operating expenses increased 10 percent to $6.3 billion and the operating ratio improved 5.3 points to 82.7 compared with first-half 2005.

By year’s end, UP officials expect commodity revenue to increase about 17 percent, the operating ratio to improve more than 4 points and traffic to rise about 5 percent compared with 2005.

“We anticipate the volume strength we saw in the first half to continue through the upcoming peak shipping season,” said Young. “All signs point to growth.”

To keep up with growing traffic demand, UP officials are considering a plan to increase the railroad’s capital spending by about $400 million in 2007. The Class I would use the funds to expand coal line and terminal capacity, and purchase locomotives.

UP also might accelerate double-track construction on the 760-mile Sunset Route between Los Angeles and El Paso, Texas. By year’s end, half the route will be double tracked. Instead of taking about seven years to complete the other half, officials are determining whether to finish the project in three to five years.

Contact Progressive Railroading editorial staff.

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