(The following story by David Wethe appeared on the Fort Worth Star-Telegram Staff website on January 30.)
FORT WORTH, Texas — Rising fuel costs held BNSF’s fourth-quarter profit to 3 percent growth, the company announced Tuesday.
But rising demand for everything from wheat to coal led the Fort Worth-based railroad to report record quarterly and annual revenue for 2007.
“Even with the general uncertainty about the economy, we believe low double-digit growth in earnings per share is achievable” in 2008, Matt Rose, chairman, president and CEO of BNSF, told analysts in a conference call Tuesday.
For the three months that ended Dec. 31, BNSF had a net income of $517 million, or $1.46 per share, on revenue of $4.2 billion. That compares with a profit of $519 million, or $1.42 per share, on revenue of $3.9 billion a year earlier.
The nation’s second-largest railroad reported an annual profit in 2007 of $1.8 billion, or $5.10 per share, on revenue of $15.8 billion. A year earlier, BNSF logged a profit of $1.9 billion, or $5.11 per share, on revenue of $15 billion.
Growing demand for wheat, soybeans and fertilizer led to 24 percent more agricultural products being shipped in 2007 than in 2006. The $804 million in agricultural revenue during the fourth quarter set a record, BNSF said. In addition, coal rose 15 percent from the previous year to $894 million.
The railroad also boosted its freight revenue by raising prices and increasing fuel surcharges by $120 million.
Fuel surcharges and price increases should help further boost growth in freight revenue this year, Rose said.
But fuel costs still hurt what could have otherwise been an even stronger quarter, company officials said.
During the fourth quarter, the railroad paid an average of $2.57 per gallon of fuel thanks to fuel-hedging contracts, which have been falling lately. That’s the most BNSF has paid all year and is 38 percent higher than in the same period a year earlier.
Analysts asked company officials numerous questions about its coal operations, including whether there is the possibility of new revenue streams from exporting coal to power plants worldwide.
Almost all of BNSF’s coal revenue comes from coal mined from the Powder River Basin, or PRB, in Wyoming. It’s a strong competitor to the old-line coal that has long been mined from the Appalachians. “Probably our biggest opportunity will be as the eastern guys export more,” Rose said.