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Burlington Northern Profit, Revenue Top Outlook

Friday, 22 Jan 2010 10:53 AM

Burlington Northern Santa Fe Corp., the nation's second-largest railroad operator, said Thursday it expects the economy to continue to gradually improve this year as it reported a smaller-than-expected drop in fourth-quarter earnings.

The comments Thursday echoed other railroad reports earlier in the week. Railroads are seen as important indicators of the country's economic health because they ship so many consumer and industrial goods used everyday.

The company, which is being purchased by billionaire investor Warren Buffett's Berkshire Hathaway, said profit slipped 13 percent to $536 million, or $1.55 per share, from $615 million, or $1.78 per share, in the 2008 period. Excluding a 25-cent-per-share tax benefit, Burlington Northern earned $1.30 per share in the latest quarter.

Revenue fell to $3.68 billion from $4.37 billion a year earlier, with the biggest declines seen in shipments of industrial products, which fell 22 percent. Shipments of consumer products, hard hit by a downturn in spending, slid 20 percent while revenue from coal declined 17 percent.

Industrial product demand has fallen off because of the continued slump in housing and construction industries. Demand for coal, used to make electricity and steel, has dropped as industrial production slowed, plants closed and more consumers conserved energy to save money.

Burlington Northern said revenue also was hurt by lower fuel surcharges, which are determined by the price of diesel. However, the company was able to partially offset drops in shipping by improving productivity.

The results topped the average estimate of analysts polled by Thomson Reuters, who expected an adjusted profit of $1.22 per share on revenue of $3.62 billion.

Also Thursday, the company said it has a capital budget of $2.4 billion for 2010, about $240 million less than last year. The shortfall is due to lower locomotive purchases.

Burlington Northern expects to spend about $2.1 billion for track, signal systems, structures and freight cars, as well as technological upgrades such as those required after the California commuter rail-Union Pacific crash.

The railroad, based in Fort Worth, Texas, will become part of Berkshire Hathaway pending shareholder approval of the $26.2 billion deal in February. The major hauler of grain, coal and consumer products operates 32,000 miles of track in 28 states and two Canadian provinces.

Also Thursday, Union Pacific Corp. reported a 17 percent drop in fourth-quarter profit. The Omaha, Neb., company is the largest railroad in the U.S. by revenue. CEO Jim Young said the economic picture for 2010 looks somewhat more favorable than last year.

And on Tuesday, Eastern railroad CSX Corp. said fourth-quarter profit rose 23 percent from a year-ago period weighed down by a loss on the sale of the money-losing Greenbrier resort. On an adjusted basis, earnings from continuing operations fell 16 percent in the latest period.

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Burlington Northern Santa Fe Corp., the nation's second-largest railroad operator, said Thursday it expects the economy to continue to gradually improve this year as it reported a smaller-than-expected drop in fourth-quarter earnings.The comments Thursday echoed other...
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