Despite declines in operating revenue and revenue carloads, and coping with severe weather problems, Union Pacific managed to post record first-quarter financial results, based on what it’s calling “improved operating performance.”
UP’s 1Q2019 net income was $1.4 billion, or $1.93 per diluted share, compared to $1.3 billion, or $1.68 per diluted share, in the prior-year period, a 15% increase. Operating income totaled $2.0 billion, up 1%. The operating ratio improved one point to 63.6%. Quarterly freight car velocity was 185 daily miles per car, a 7% improvement.
UP’s 1Q2019 operating revenue was $5.4 billion, down 2% compared to 1Q2018. Business volumes, as measured in total revenue carloads, also decreased 2%; lower volumes and negative mix offset increased fuel surcharge revenue and core pricing. Volume increases in Industrial and Premium were more than offset by declines in Energy and Agricultural Products. Energy dived 16%; Agricultural Products dipped 3%. Premium and Industrial rose 3% and 5%, respectively.
In terms of cost reduction, the $2.07 per gallon average quarterly diesel fuel price in 1Q2019 was 3% lower than 1Q2018. UP saw a payroll tax refund of $42 million, along with associated interest income of $27 million. (In October 2018, UP announced layoffs of approximately 475 employees across its network in 4Q2018, as well as elimination of approximately 200 contract positions. The impacted positions are in various locations across the UP system. This was the first of additional waves of layoffs that will occur through 2020.)
UP’s reportable personal injury rate rose 21.6% to 0.90 per 200,000 employee-hours, compared to 0.74 in 1Q2018.
Also, UP repurchased 18.1 million shares in 1Q2019 at an aggregate cost of $3.5 billion.
“We delivered record first quarter financial results driven by improved operating performance, while dealing with significant weather [problems],” said Lance Fritz, Union Pacific Chairman, President and CEO. “Unified Plan 2020 created a more resilient and robust network, allowing us to quickly return to normal operations. We look to build on the momentum we had prior to the weather challenges and provide a consistent, reliable service product for our customers, while at the same time improving our operating efficiency. We remain focused on increasing shareholder returns through appropriate capital investments and returning excess cash to shareholders.”