updated 4/19/2007 5:31:56 PM ET 2007-04-19T21:31:56

Union Pacific Corp. reported a 24 percent jump in first-quarter net income Thursday as revenue rose 4 percent for the nation's largest railroad behind strong improvement in revenue for shipping chemical and agricultural products.

Union Pacific, a major shipper of Wyoming coal, said it earned $386 million, or $1.41 per share, during the quarter that ended March 31. That's up from the same period a year ago, when the railroad made $311 million, or $1.15 per share.

That result exceeded the company's and analysts' predictions. The railroad said in January that it expected quarterly profits to fall between $1.25 and $1.35 per share. Analysts polled by Thomson Financial predicted a profit of $1.28 per share.

Shares of Union Pacific set a new 52-week high at $118.62 Thursday. The stock rose $2.59, or 2.3 percent, to close at $116.37 on the New York Stock Exchange.

The railroad's quarterly revenue of $3.85 billion fell just shy of analysts' prediction of $3.89 billion revenue. Still, the 2007 figure is up 4 percent from $3.71 billion in the first quarter of 2006.

Revenue grew 9 percent for chemicals and 8 percent for agricultural products. Those gains helped offset a 2 percent decline in automotive revenue and a 3 percent decline in industrial products.

Revenue was also up 4 percent for both energy and intermodal shipping. Intermodal service involves transferring freight among types of transportation, such as loading shipping containers on rail cars for final delivery.

Jim Young, the railroad's chairman and chief executive, said Union Pacific raised prices by 7 percent on average during the quarter.

JP Morgan analyst Thomas Wadewitz said in a research note that Union Pacific can continue to improve profits as it becomes more efficient and as the railroad gets the opportunity to renegotiate the long-term contracts. Railroad officials said about 32 percent of Union Pacific's contracts are "legacy contracts" that need to be renegotiated.

"With the greatest legacy contract repricing opportunity and the most room for operational improvement, we continue to believe UNP (Union Pacific) has the most compelling upside potential of all the major rails," Wadewitz wrote.

First-quarter carloads fell 2 percent year over year to 2.3 million. Winter storms complicated transit and shut down Wyoming's coal mines for several days in late March, and a weaker housing market and decreased domestic intermodal volumes hurt results.

Officials said weather cost the railroad about $15 million during the quarter.

"Despite economic uncertainty, we will continue to enhance shareholder value through our productivity initiatives over the balance of the year," Young said. "Our first-quarter results were a good start, giving us momentum for the rest of 2007."

Fuel costs crept higher during the quarter to $1.90 per gallon versus $1.87 a year earlier. But the railroad used 13 million fewer gallons of diesel and saved $26 million because shipping volume was lower and the consumption rate improved.

Union Pacific said the average amount of time trains spent in rail yards, which the industry calls "dwell time," dropped 13 percent, to 25.3 hours in the quarter, down from last year's 29 hours.

And its average train speed increased to 21.7 mph, up from last year's 21.3 mph.

But if the nation's economy slows dramatically this year, it could affect Union Pacific's performance.

"The uncertainty is the economy right now, but we feel good about our operating efficiencies this quarter," Young said.

Railroad officials predicted 10 percent to 15 percent earnings growth in the second quarter and per share earnings of $1.44. For the full year, officials are predicting 4 percent to 6 percent growth in revenue.

Union Pacific also repurchased 2 million shares of its stock during the quarter at an average price of $98.68.

Union Pacific's stock has also benefited from the recent news that legendary investor Warren Buffett's company, Berkshire Hathaway, became the largest investor in Burlington Northern and bought stock in two other unnamed railroads. Shares of all the major North American freight railroads rose after that news earlier this month.

Union Pacific operates 32,400 miles of track in 23 states from the Midwest to the West and Gulf coasts.

Copyright 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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