CEO Jim Young said he expects the economy and the railroad's revenue will continue growing in 2012.
"Looking ahead, we expect continued slow but steady economic growth in 2012," Young said Thursday. "The diversity of our unique railroad franchise will continue to provide growth opportunities in various markets."
Union Pacific shares rose $3.82, or 3.5 per cent, to $113.64 in midday trading.
The Omaha-based railroad company said that its net income rose to $964 million, or $1.99 per share, during the last three months of 2011, up from $775 million, or $1.56 per share, a year ago.
Its revenue grew 16 per cent to $5.1 billion from $4.41 billion a year ago.
Union Pacific said the carloads it carried grew about 3 per cent overall during the quarter with strong growth in chemical, automotive, energy and industrial shipping. The only slight volume declines came in UP's agricultural and intermodal divisions.
Analysts surveyed by FactSet expected Union Pacific to report earnings of $1.82 per share on revenue of $5.05 billion.
Union Pacific's results offer insight into the nation's economic health because of the variety of cars, crops, chemicals, lumber and containers of imported goods the railroad carries.
Railroad officials said they expect small improvements in auto sales, housing construction and the nation's gross domestic product to help Union Pacific's profit grow in 2012. UP predicted that it will see strong growth in the petroleum products, vehicles and lumber it carries this year.
Fuel costs soared 36 per cent to $935 million from $687 million for Union Pacific during the fourth quarter as the price the railroad paid for diesel fuel grew to an average of $3.16 per gallon.
But Union Pacific was able to limit growth in other major costs. The railroad said compensation costs grew only 4 per cent to $1.2 billion as it continued to slowly recall furloughed employees.
UP had 1,030 employees furloughed at the end of 2011 and about 600 locomotives stored. A year ago, about 1,500 employees remained furloughed, down from 4,200 at the end of 2009.
Young said the railroad industry is making progress in resolving its national labour negotiations. Ten of the 13 unions have approved contracts and two others are in the process of voting on tentative agreements. He said he hopes the industry will be able to reach agreement with the remaining union, the Brotherhood of Maintenance Way Employees, before the current cooling-off period ends Feb. 8.
"Both parties are very motivated to get a deal done," Young said in an interview with The Associated Press.
For all of 2011, Union Pacific reported net income of $3.29 billion, or $6.72 per share, up from $2.78 billion, or $5.53 per share, in 2010. Annual revenue grew 15 per cent to $19.56 billion from the previous year's $16.97 billion.
Union Pacific is the nation's largest railroad with more than 32,400 miles of track in 23 states between the West, the Midwest and the Gulf coast.
Union Pacific Corp.: www.up.com