(The Associated Press circulated the following article on April 25.)
DALLAS — Burlington Northern Santa Fe Corp., operator of the nation’s second-largest freight railroad, said Tuesday first-quarter profit gained as its trains carried more volume at higher prices, offsetting a spike in fuel costs.
The railroad said it earned $410 million, or $1.09 per share, compared to $321 million, or 83 cents per share, a year earlier.
Analysts had expected the Fort Worth-based company to earn $1.04 per share, according to Thomson Financial.
Burlington Northern said second-quarter earnings would rise 20 percent to 25 percent from a year ago and full-year earnings would increase 20 percent, greater than its previous forecast.
Still, Burlington shares fell $5.35, or 6.2 percent, to close at $81.49 on the New York Stock Exchange. Other rail stocks also dropped, and one analyst attributed the sell-off to profit-taking by investors who have enjoyed big gains in the stocks this year.
Revenue at Burlington Northern rose 16 percent, to $3.46 billion, although volume carried by the trains rose only 5 percent.
The difference is because railroads, unlike U.S. airlines, have been able to pass higher energy costs to their customers in the form of rate increases and fuel surcharges.
Shippers have complained about the surcharges, and the federal Surface Transportation Safety Board is scheduled to hold a hearing on the issue next month.
Burlington Northern said demand for rail service was very strong across its business, with double-digit gains in revenue from carrying coal, consumer goods, and industrial and agricultural products.
The increasing traffic on America’s freight rail lines have slowed down service. Burlington Northern’s record for on-time delivery has steadily slipped since 2003. For example, shipments of industrial products were on time 82.3 percent in early 2003 but just 67.2 percent last quarter.
Matthew Rose, chairman and chief executive of the railroad — which is second in the U.S. only to Union Pacific Corp. — said his company is trying to make up for years of inadequate spending on track and locomotives.
”We continue to see a lot more volume than we had planned for … we just fell behind,” Rose said.
Burlington Northern is increasing capacity along its main Los Angeles-Chicago line to handle the growth of imports from Asia, much of which must be shipped from West Coast ports to the rest of the country. Executives said Tuesday they also plan to buy about 360 more locomotives this year, pushing its fleet past 5,000.
Randy Cousins, an analyst for BMO Nesbitt Burns, said railroads are benefiting from an increase in consumer goods from Asia, highway congestion that has slowed truck deliveries, and a shortage of truck drivers.
”The railroad industry is in the best competitive position it’s been in decades,” Cousins said.
Cousins said Burlington Northern turned in a strong first quarter and raised its outlook for the rest of the year. The stock’s decline on Tuesday, he said, was profit-taking by investors who saw Burlington’s shares rise 22.6 percent and other U.S. railroads gain 21 to 35 percent for the year through Monday.
Burlington Northern said its first-quarter fuel costs jumped 43 percent from a year ago, to $561 million. That contributed to a 14 percent rise in overall costs.
Burlington Northern was able to overcome the cost increases by raising revenue per car by 11 percent, growing its fleet of cars by nearly 5 percent, and charging most shippers a fuel fee.
Burlington Northern ended March with more than 41,000 employees, an increase of more than 2,000 workers.
The railroad operates over 32,000 miles of track in much of the United States and western Canada.