(The Lincoln Journal Star posted the following article on its website on July 26.)
FORT WORTH, Texas — Burlington Northern Santa Fe Corp., the nation’s second-largest railroad, reported second-quarter profit above expectations Tuesday as its trains remained busy hauling coal and consumer goods across the nation.
But the company’s shares fell on the New York Stock Exchange on fears that the economy won’t sustain the growth U.S. railroads have enjoyed.
Its shares fell $2.30 to close at $67.50 as investors reacted to disappointing results at package delivery company and economic bellwether United Parcel Service Inc. UPS stock dove $8.20 to close at $71.80.
Burlington stock was down as much as $5.40 during the session. Almost 6.5 million shares traded, compared to its 2.65 million daily average.
“Investors are concerned about how the railroads will hold up in a slowing economy, and UPS seems to be indicating weaker demand is ahead,” Peter Smith, an analyst at Morningstar, told Reuters.
Shares of railroad companies Union Pacific Corp., the industry leader, and CSX Corp. fell last week, despite quarterly earnings above analysts’ expectations, due to the same fears.
BNSF said Tuesday it earned $470 million or $1.27 per share in the April-June quarter, compared to $366 million or 96 cents per share a year earlier. The results for the June quarter included a 4 cent per share benefit from lower tax rates.
Analysts had expected a profit of $1.22 per share, according to a Thomson Financial survey.
Revenue was $3.7 billion, compared to $3.14 billion a year ago, and beat the $3.65 billion that analysts were expecting in the June quarter.
Railroads such as BNSF and Union Pacific Corp., which employ thousands of people in Nebraska, have benefited from the ability to raise prices to offset rising fuel costs. Strong demand for consumer goods have also helped the railroads.
Chairman and Chief Executive Matthew K. Rose reported unprecedented demand across its services, as second-quarter freight revenue rose 18 percent to a record $3.59 billion.
Revenue from coal shipments grew 21 percent, largely due to record loads from the Powder River Basin in Wyoming. Consumer product revenue rose 19 percent on both more volume and higher prices. Industrial and agricultural revenues also gained by double-digit percentages.
The company raised about $425 million from fuel surcharges, up from $220 million a year ago.
BNSF’s subsidiary, BNSF Railway Co., covers 32,000 miles of track in 28 states and two Canadian provinces.
Shares of BNSF hit a 52-week high of $87.99 in April but have slipped since then, which analysts attribute to profit-taking by investors and to fears the U.S. economy may slow down, which would hurt demand for rail service.