OK, OK, I surrender. I've been skeptical on most of the Class 1 railroads for a little while now, yet their shares keep rising. And while Union Pacific (NYSE:UNP) has lagged its peers in the past year, a double-digit stock-price appreciation in the past quarter isn't too bad.

Before moving on to this quarter's performance, let's talk a bit about how I managed to miss this ongoing bull market in the rails. For better or worse, I'm a value guy, and I tend to cling to the notion that companies that can't consistently earn back their cost of capital are not good long-term holdings.

That's true enough ... but whether or not cyclical companies can deliver the goods for long stretches of time, they can have exceptional runs when their business is going well. And let's face it -- trying to be a value guy in the midst of a cyclical bull run is a pretty masochistic effort. Who needs "value" when shares of Burlington Northern (NYSE:BNI), NorfolkSouthern (NYSE:NSC), Canadian National (NYSE:CNI), and CSX (NYSE:CSX) have all doubled over the past two years?

More specific to the rails and Union Pacific, though, I just didn't foresee so strong an increase in railroads' pricing power. I knew there were some issues in the trucking space that were helping the rails, and I knew that Union Pacific had more upside to pricing (a legacy of past below-market contracts, when the company competed more aggressively on price). I just didn't think it would be this much.

In any case, Union Pacific saw revenue rise 18% this quarter, with roughly one-third from volume and mix, one-third from price increases, and one-third from fuel recovery charges. The operating ratio improved significantly, and efficiency metrics like train speed and dwell time got better. Operating earnings nearly doubled, and the company achieved all this despite a rather uninspiring result from coal transport (partly because of mine closings).

Duly chastened, I'm won't completely reverse myself and say that I'm looking to buy Union Pacific now. But I will say that it's doing better than I expected, and investor enthusiasm has remained steadfast. I'll also point out that it has a lot to gain from operational improvements, Western coal shipments, and maybe even the ethanol boom, since it hauls a lot of corn. While I'm not yet a long-term believer, playing chicken with freight trains is almost always a losing game.

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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).