NEW YORK — According to a wire service, big railroad companies reported higher earnings in the first quarter, as cheap fuel and aggressive cost-cutting helped overcome declining coal shipments because of the warm winter.
Despite better earnings, investors were not convinced that the gains could be sustained. Shares of most railroad stocks rose only slightly for the week or barely moved, and some lost value after their results were released.
The companies said the gains were based on lower expenses, and analysts said efficiency gains were minimal. Revenues fell for all the railroads reporting earnings this week, except Union Pacific Corp. (UNP.N), which reported a 1 percent increase.
Rick Paterson of UBS Warburg said lower expenses may be slightly deceptive, as the railroads benefited from fuel expense comparisons with the first quarter of 2001, when fuel prices were high.
“If you remove the impact of fuel, margin improvement was fairly flat,” he said.
Union Pacific, the No. 1 U.S. railroad operator, on Thursday said profits rose a better-than-expected 23 percent, while rival Kansas City Southern Industries Inc.reported earnings nearly doubled.
Omaha, Nebraska-based Union Pacific said net income jumped to $222 million, or 86 cents per share, compared with $181 million, or 72 cents per share a year earlier. The results beat Wall Street’s mean forecast of 83 cents, according to analysts polled by Thomson Financial/First Call.
Shares of Union Pacific closed up $1.15, or about 2 percent, at $55.90 in New York Stock Exchange trade.
Kansas City Southern saw profits climbed to $11.7 million, or 19 cents per share, from $5.9 million, or 10 cents per share, a year ago.
WARM WINTER
Earlier in the week, three other railroad giants reported higher earnings. Norfolk Southern Corp. (NSC.N), which runs telecommunications businesses as well as its freight railway, on Wednesday said first-quarter income from continuing operations rose to $86 million, or 22 cents a share, from $61 million, or 16 cents a share a year earlier.
Those results were slightly below Wall Street’s mean estimate of 23 cents per share. The Norfolk, Virginia-based company said revenues, which fell 2.7 percent, were hurt by declines in coal and other shipments.
Burlington Northern Santa Fe Corp. (BNI.N), the No. 2 U.S. railroad company, on Tuesday said earnings rose 23 percent to $172 million, or 45 cents per share, up from $140 million, or 34 cents per share.
On Monday, Richmond, Virginia-based CSX Corp. (CSX.N), the largest railway in the eastern United States, said earnings more than tripled to $68 million, or 32 cents a share, before an accounting charge.
In the year-earlier quarter, CSX reported profit of $20 million, or 10 cents per share.
All the companies were hurt by the unseasonably warm winter, which reduced demand for coal. The railroads rely on coal for one-quarter of their freight.
“The coal picture will still be bleak in the second quarter,” Paterson said. Overall, he added, “The railroads did a reasonably good job in a tough economic environment.”