The Omaha, Neb.-based railroad said it earned net income of $516 million, or $1.01 per share, in the quarter. That's up from the $362 million, or 72 cents per share, Union Pacific generated last year during the Great Recession.
Union Pacific and the other major freight railroads offer some insight into the overall economy because the volume of cars, chemicals, crops, lumber and containers of imported goods they carry hints at the health of those industries.
Union Pacific CEO Jim Young said he is feeling more optimistic about 2010, but he cautioned that it is still early in the recovery and he did not provide specific earnings guidance.
"It looks like the strength we saw in the first quarter is continuing, but you have to be careful," Young said.
Young said he won't feel confident about the economic rebound until he sees more companies start hiring more workers. But he said it was encouraging to see demand increase for industrial products like lumber for the first time in two years.
Overall, UP hauled 13 percent more carloads during the quarter, and demand was up in every sector except coal. But revenue improved in every one of Union Pacific's six divisions even though the number of coal carloads declined 1 percent.
Union Pacific said its revenue grew 16 percent to nearly $4 billion.
BMO Capital Markets analyst Randy Cousins said Union Pacific's earnings offered encouraging news about the economy.
"We're not back to 2008 levels, but we're certainly headed in the right direction," Cousins said.
The railroad's results beat Wall Street expectations even though the quarter included a one-time expense of $45 million related to a restructuring of a shipping contract between Union Pacific and CSX railroads. Analysts surveyed by Thomson Reuters expected Union Pacific to report quarterly earnings of 94 cents per share on $3.81 billion revenue.
UP's closed down 78 cents at $76.25. Earlier in the day, the stock traded at a 52-week high of $78.03.
Union Pacific is the nation's largest railroad with 32,400 miles of track crossing 23 states from the Midwest to the West and Gulf coasts. But UP is handling only about 170,000 carloads a week — well below its capacity of about 200,000 carloadings a week — because of the weak economy, and about 2,800 employees remain furloughed.
Young said he hopes to be able to rehire all those furloughed workers, but he doesn't know how quickly that might happen because the railroad won't start significant hiring until shipping volume improves more.
JPMorgan analyst Thomas Wadewitz praised Union Pacific during the company's conference call for the railroad's efforts to control costs.
"Great performance on the cost side. Very impressive," Wadewitz said.
Through furloughs and other measures, UP reduced its compensation expenses 1 percent during the quarter to $1.06 billion. Overall, the railroad's operating expenses grew 8 percent to $2.98 billion, but most of the increase was related to higher fuel prices.
Union Pacific's fuel costs jumped 51 percent to $583 million, as the average price per gallon of diesel climbed to $2.16 from last year's $1.51.