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(Adds CEO comments on freight volumes, coal, pricing, updates stock action)
CHICAGO, Jan 29 (Reuters) - 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 downturn.
"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 Estimates.
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 interview.
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 stronger pricing.
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 in 2006.
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 of $85.34.
BNSF has been trading at 16.08 times anticipated 2008 earnings, slightly below the sector average of 16.68 times anticipated earnings. (Reporting by Nick Carey, editing by Mark Porter, Maureen Bavdek and Derek Caney)