Buffeted by decreases in operating income and revenue and business volumes compared to the prior-year quarter, Union Pacific still managed to post an all-time quarterly record operating ratio of 60.3% in 2015’s third quarter. A huge decrease in average quarterly diesel fuel costs—$1.81 per gallon, a whopping 40% lower than in third-quarter 2014—was the determining factor.
UP’s third-quarter 2015 net income was $1.3 billion, or $1.50 per diluted share, compared to $1.4 billion, or $1.53 per diluted share, in third-quarter 2014, a 2% decline. Operating income totaled $2.2 billion, down 5%. Operating revenue of $5.6 billion was down 10%, as volume declines, lower fuel surcharge revenue and a negative business mix more than offset core pricing gains. Business volumes, as measured by total revenue carloads, declined about 6%. Volume declined in each of UP’s business groups with the exception of automotive, with coal taking the biggest hit, down 18%.
UP’s 60.3% operating ratio was an all-time quarterly record, 2 points better than third-quarter 2014 and 1.1 points better than the previous all-time quarterly record set in fourth-quarter 2014. The operating ratio benefited by about 1.5 points from the net impact of lower fuel prices.
“On the cost side, we’ve made significant progress aligning our resources to current demand,” said Chairman, President and CEO Lance Fritz. “We’ve made great progress in meeting this year’s challenges. As we finish 2015 and head toward next year, we continue to face many uncertainties. Energy prices, the consumer economy, grain markets and the strength of the U.S. dollar will all be key to future demand. Over the long term, we are well positioned to safely provide our customers with excellent service, while delivering strong value to our shareholders.”