CHICAGO — A wire service reports that leading railway executives painted a brightening picture of the rail industry on Friday, saying business was beginning to get a lift from the economy and they were on target to meet financial forecasts.
Burlington Northern Santa Fe’s Chief Financial Officer Thomas Hund, speaking at the J.P. Morgan Logistics Conference in New York, said key customer segments at the Fort Worth, Texas-based railway were beginning to pick up after a long drought.
Burlington Northern is the nation’s second-largest railway, with 33,000 miles of tracks in the western United States and Canada.
“We’ve gone through about eight quarters, including the one we’re in now, of a down economy,” Hund said. “So when we look at the industrial economy — things like lumber, chemicals — we’re starting to see at least modest pickups in some of those shipments, and we’re getting some positive feedback from some of our customers.”
His comments echoed those made by Richmond, Virginia-based CSX Corp. earlier this week. Although CSX issued an earnings warning on Wednesday due to weak coal shipments, the company also said in its statements that revenues from merchandise and automotive shippers were rising due to some strengthening in the U.S. economy.
The chief financial officer of the nation’s largest railway, Union Pacific Corp. , was also upbeat in a presentation made to the conference.
Union Pacific CFO Jim Young said he felt good about the company’s outlook for the rest of the year, predicting that the company’s 2002 revenue growth would be at the higher end of the forecast range.
“In the fourth quarter last year, we said here’s how we saw 2002: We said our revenue growth would be 1 to 3 percent — we’re going to be on the high side of that,” Young said.
He said the Omaha-based company also had forecast double-digit earnings per share compared to 4 percent in 2001. The railway also had forecast an operating ratio of below 80, which would be an all-time best for the company. It had predicted capital investment would be around $1.9 billion and pre-cash flow would be in the $350 million to $400 million range.
“I feel very confident with that outlook in terms of our numbers,” Young said of those forecasts.
He also said the company was aiming for an operating ratio in the mid-70s over the next three years. Operating ratio is a closely watched measure of operating expenses as a percentage of revenues.
Young added that Union Pacific would use cash generated to continue paying down its debt after Standard & Poor’s recently raised its corporate credit rating on the company.
Burlington Northern shares were up more than 3 percent on the New York Stock Exchange ( news – web sites) on Friday, while Union Pacific stock was up 2 percent and CSX shares were 1.7 percent higher.
The Dow Jones U.S. Railroad Index <.DJUSRR> was up 2 percent to 186.57, while broader stock market indexes were also firmer.