(The following article by Dan Piller was posted on the Fort Worth Star-Telegram website on October 26.)
FORT WORTH, Texas — Paced by strong demand for coal, agricultural and consumer-goods shipments, Burlington Northern Santa Fe Corp. of Fort Worth reported a record quarterly profit of $414 million, or $1.09 per share, for the third quarter ended Sept. 30.
Earnings increased despite a 50 percent rise in BNSF’s diesel-fuel costs, up to $499 million for the quarter. The company dealt with that problem with rate increases and fuel surcharges that added about 6 percent to its charges to customers.
The Wall Street consensus predicted $1 per share net income for the quarter. BNSF Chairman Matt Rose said the railroad expects fourth-quarter earnings growth of as much as 25 percent.
“We continue to realize more value for our services,” Rose said. The high demand for rail services, spurred by high diesel prices, which make truck rates less competitive, have enabled BNSF and rival Union Pacific Railroad to increase freight rates for the first time in decades.
Third-quarter freight revenue rose 18 percent to $3.22 billion. International shipments, mostly Asian imports picked up at Southern California ports and carried inland, were up 30 percent.
Analysts were hard-pressed to find problems with BNSF’s performance, but Scott Flower of Citigroup noted the disruption caused by a derailment during the quarter and said the extra traffic has so crowded BNSF’s system “that even small derailments or other events can have a considerable impact.”
Flower said BNSF might want to spend more on track maintenance and rebuilding.
Rose said BNSF hasn’t decided on capital expenditures for 2005. It will spend $2.1 billion this year on track repair and maintenance, he said.
“We really need to know what our growth will be before we set the cap ex figure,” Rose said.
The biggest maintenance problem on the 33,000-mile BNSF system is in the coal-rich Powder River Basin of Wyoming, where extensive track upgrading has been required because of a boom in coal shipments to utilities.