(Adds CEO comments on freight volumes, coal, pricing, updates
CHICAGO Jan 29 No. 2 U.S. railroad Burlington
Northern Santa Fe Corp BNI.N on Tuesday reported a
better-than-expected fourth-quarter profit despite higher fuel
costs and slower U.S. economic growth.
Like other major U.S. railroads, BNSF, whose shares rose 2
percent in morning trading, has managed to maintain its profits
at robust levels over the past few quarters despite the housing
sector slowdown and a softer overall U.S. economy.
The key to this success has been strong pricing, but some
analysts have questioned how long the railroads can maintain
their pricing power should the economy experience a real
"This is an acceptable result, but it does show evidence of
a slowdown," said Don Hodges, president and co-manager of the
Hodges Fund, which manages $630 million in assets and holds a
large position in BNSF. "At the same time, BNSF has managed to
maintain pricing power, which is very, very important."
The Fort Worth, Texas-based railroad reported
fourth-quarter net income of $517 million, or $1.46 a share,
compared with $519 million, or $1.42 a share, a year earlier.
Wall Street analysts had on average expected earnings per
share for the quarter of $1.39, according to Reuters
Revenue at BNSF rose to $4.25 billion from $3.88 billion.
Analysts had expected revenue for the quarter of $4.07 billion.
The increase in revenue came despite a falling number of
carloads on its network, which is evidence of strong pricing.
The company expects low double-digit earnings-per-share
growth for full-year 2008 and high single-digit growth in the
first quarter of the year.
Chief Executive Matt Rose told Reuters that the company
expects freight volumes to be "down 1 percent to up 1 percent"
in 2008 though much depended on what impetus possible U.S.
Federal Reserve rate cuts and the planned government stimulus
package will provide for the U.S. economy.
"There are a lot of moving parts out there, but volumes
should fall within that range," Rose said in a telephone
BNSF should see it strongest volume growth of between 4
percent to 5 percent in its coal segment, Rose added. He said
that pricing should remain strong on 2008, with an extra boost
coming from the re-pricing of old coal contracts.
Last week, the largest U.S. railroad Union Pacific Corp
(UNP.N) also reported a stronger-than-expected profit helped by
BNSF's fourth quarter carloads were down for BNSF's
consumer products division -- which includes automotive
shipments -- but up for agricultural products, coal and
industrial products. Overall, total carloads for the quarter
reached 2.6 million, down from 2.677 million in the same period
Fuel costs for the quarter jumped to $960 million from $703
million a year earlier.
In a presentation for analysts the company said it plans
capital expenditures of $2.45 billion in 2008, down from $2.59
billion in 2007.
BNSF had 354.3 million average shares outstanding at the
end of the fourth quarter, compared with 365.3 million a year
earlier. Warren Buffett's Berkshire Hathaway Inc (BRKa.N)
recently raised its stake in BNSF to 18.2 percent.
In trade on the New York Stock Exchange, BNSF shares were
up $1.62 or 2 percent at $84.76, having reached an early high
BNSF has been trading at 16.08 times anticipated 2008
earnings, slightly below the sector average of 16.68 times
(Reporting by Nick Carey, editing by Mark Porter, Maureen
Bavdek and Derek Caney)