BNSF Profit Falls Slightly on One-Time Costs, But Beats Estimates

By Beacon Staff

FORT WORTH, Tex. (AP) – Burlington Northern Santa Fe Corp., the nation’s second-largest railroad, said Tuesday its fourth-quarter earnings fell slightly as higher fuel costs pulled down record freight revenue.

The company predicted that earnings per share will grow by double digits this year, partly due to less spending on expansion. Executives said the current rail system was adequate, and demand could be hurt if the economy slows further.

Shares of Burlington Northern rose $1.69, or 2 percent, to $84.83 in early trading.

Burlington Northern, which runs the BNSF Railway Co., said it earned $517 million, or $1.46 per share, in the fourth quarter. That compared with a profit of $519 million or $1.42 per share a year ago, when there were more shares outstanding.

Revenue rose 9 percent to $4.24 billion, with especially strong demand for shipping coal and agricultural goods.

Analysts expected the company to earn $1.39 per share on revenue of $4.06 billion in the fourth quarter, according to a survey by Thomson Financial.

Burlington Northern said its average price for fuel jumped 38 percent, to $2.57 per gallon. The company levies a fuel surcharge on most customers.

The railroad was helped by demand for energy to run cars and generate electricity.

Shipments of agricultural goods rose 24.5 percent, boosted by demand for ethanol used in gasoline, and for fertilizer. And shipments of coal used in power plants grew 15.4 percent.

The railroad saw much slower growth of 2 percent to 5 percent for shipments of consumer goods and industrial products.

Chairman and Chief Executive Matthew K. Rose said the company wasn’t yet seeing signs of a recession, but he suggested that BNSF might ship fewer industrial and consumer products if the economy goes into a deeper slump.

In the January-March quarter, Rose said the Fort Worth-based company expects to post a high-single-digit increase over its adjusted earnings of $1.10 per share in the same period last year. Higher prices will offset flat volume, he said.

For all of 2008, he predicted low-double-digit increase in 2007’s earnings of $5.24 per share, a figure that excluded some costs.

Analysts expect the company to earn $1.11 per share in the first quarter and $5.80 for all of this year, according to Thomson.

Like many other companies, Burlington has boosted per-share earnings by buying back its own stock, which is how it produced higher earnings per share with less net income. The company spent more than $1 billion on share repurchases last year and expects to continue buying shares this year.

The company will cut capital spending, including expansion, to $2.45 billion in 2008, down from $2.59 billion in 2007.

For all of last year, Burlington earned $1.83 billion, or $5.10 per share, on revenue of $15.80 billion. In 2006, the company earned $1.89 billion on $14.99 billion revenue.

Burlington cut 580 jobs last year and now employs close to 41,000 people.