(Dow Jones Newswires circulated the following story by Terry Kosdrosky on May 15.)
DETROIT — The chief executive of Union Pacific Corp. (UNC), the nation’s largest railroad operator, said Thursday the company set a goal of having an operating ratio in the low 70s by 2010.
An operating ratio is operating expenses divided by operating revenue. Union Pacific’s ratio in the first quarter was 81.5%, compared with 81.3% in the prior-year period, due to higher fuel prices.
Chief Executive Jim Young, speaking during a conference with analysts, said that growth in freight, pricing and productivity improvements will drive the improvement in operating ratio.
Chief Financial Officer Rob Knight said the rising cost of diesel fuel has ” masked” some of Union Pacific’s progress in improving its ratio.
“I’m not making excuses,” he said during the conference, which was Webcast. “But it is a headwind.”
Fuel surcharges are a critical piece of the business, and Knight said the goal is to offset 100% of the effect of fuel price increases.
Knight said he expects compound annual earnings-per-share growth in the mid- teens through 2012 and a 6-8% compound annual growth in freight revenue.
Shares of Union Pacific were up 4 cents to $149.99 in recent trading.