(Reuters circulated the following article on April 25.)
CHICAGO — No. 2 U.S. railroad Burlington Northern Santa Fe Corp. (BNI.N) said on Tuesday that quarterly earnings rose 28 percent on higher volumes, strong pricing and fuel surcharges, beating Wall Street expectations.
U.S. railroads have benefited from rising imports from developing nations such as China, tight capacity on their networks and a driver shortage in the trucking industry that is pushing more freight onto the rails.
The Fort Worth, Texas-based company said first-quarter net profit increased to $410 million, or $1.09 a share, from $321 million, or 83 cents a share, a year earlier.
Wall Street expected earnings of $1.04 per share on average, according to Reuters Estimates.
The rise in business for the railroads led to significant rate increases in 2005 after more than two decades in which prices largely stagnated. The railroads have either instituted further price hikes so far this year or have indicated that they will do so, with more increases possible in 2007.
Burlington Northern revenue jumped to $3.46 billion in the first quarter from $2.98 billion. This includes fuel surcharges of approximately $350 million compared with about $170 million in the first quarter of 2005.
Railroads and other shippers have passed high fuel costs onto customers through surcharges, a practice that has led to complaints from some customers that the railroads are profiting from them. The railroads have denied this.
Compared with the first quarter of 2005, Burlington Northern experienced double-digit revenue increases in each of its main four business groups. The company also improved its operating ratio to 76.5 percent from 78.1 percent.
“Demand for rail service continued to be very strong with growth spread across each of our four business groups,” said Chief Executive Officer Matthew Rose in a statement.
Burlington Northern said that in late February it settled $600 million in prepaid forward transactions entered into in December 2005 to purchase shares of the company’s common stock.
The company said this had no impact on shares outstanding at the end of 2005. Upon settlement, however, it reduced the number of shares outstanding by approximately 8 million shares.
Shares in Burlington Northern, valued at more than $32 billion, have risen more than 22 percent so far this year, just ahead of the 21 percent gain made by Union Pacific Corp. (UNP.N), the largest U.S. railroad.
Burlington trades slightly under 18 times forecast 2006 earnings, compared with Union Pacific’s 18.4 times.