(The following article by Dan Piller was posted on the Star-Telegram website on April 28.)
FORT WORTH, Texas — Record traffic pushed up profit at Burlington Northern Santa Fe Railway in the first quarter, pointing to a stronger economy, company officials said.
BNSF, based in Fort Worth, reported a first- quarter profit of $193 million, or 52 cents per share, up from $187 million, or 50 cents a share, a year earlier, when an accounting change added 10 cents per share to the total.
Revenues jumped 11 percent for the railroad, boosted by record traffic for agriculture, consumer goods and international containers, and a strong performance by its coal unit.
Although problems at rival Union Pacific Railroad may have helped some, BNSF Chairman Matt Rose told investors Tuesday that the results were largely the result of improving economic trends.
Union Pacific has acknowledged bottlenecks and service delays in Houston and on the West Coast primarily because of crew shortages amid record traffic volumes. During a similar, but much worse, congestion problem for Union Pacific in 1997-98, BNSF grabbed $1 billion in new traffic only to lose it to UP later.
“What assurance do we have that the traffic growth this time has come at Union Pacific’s expense, and that this traffic will go back to Union Pacific when they get their system straightened out as they did in 1998?” asked Morgan Stanley analyst James Valentine.
Rose said that BNSF’s traffic growth, up 11 percent to $2.45 billion and surpassing longtime leader Union Pacific in volume during the quarter, was the result of economic growth.
“I hate to be accused of defending my competitor,” Rose said of Union Pacific. “But they’re handling significant volumes of traffic, too. This isn’t like 1997-98. I don’t see a significant shift of business that we might lose later.”
Valentine said that, aside from the question about the permanence of BNSF’s traffic gain, the railroad had a “great quarter.”
Buoyed by the strong first quarter, Rose predicted that BNSF’s full-year earnings might rise as much as 20 percent, ahead of the 10 percent to 15 percent gain forecast earlier.
“In my 22 years in the trucking and railroad business, I’ve never seen all the commodity groups come together with such a strong performance,” Rose said.
Agricultural shipments grew by 22 percent, based on strong exports caused by a weakening dollar. Similarly, BNSF’s mainstay coal business grew by 7 percent as utilities responded to higher natural gas prices by shifting to coal as their generator fuel.