Friday, July 24, 2009

BNI Holding Up in a Tough Market

Burlington Northern Santa Fe Corp. (BNI) reported yesterday. They are my favorite of the railroads, and they delivered a pretty good quarter considering what they were dealing with. Here's some of the stats (via Reuters):

No. 2 U.S. railroad Burlington Northern Santa Fe Corp on Thursday reported a better-than-expected net profit, with lower fuel expenses and aggressive cost controls offseting a 26 percent decline in revenue as the recession continued to
hurt freight volumes.

The railroad said volumes at economically sensitive business units, which it did not specify, have begun to stabilize. BNSF hauls a variety of commodities such as coal, grain, lumber, construction materials, automobiles and consumer goods.

The Ft Worth, Texas-based company reported second-quarter net income of $404 million or $1.18 a share, compared with $350 million or $1.00 a share a year earlier. The company's earnings for the same quarter a year earlier were also affected by a one-time 31 cent per share charge.

Wall Street analysts had on average expected earnings per share for the latest quarter of $1.00, according to Reuters Estimates.

Revenue in the quarter fell to $3.32 billion from $4.48 billion. Analysts had expected revenue of $3.74 billion, according to Reuters Estimates.

"BNSF had another strong quarter of cost control in an extremely difficult economic environment," Chief Executive Matthew Rose said in a statement. "Because of our continued focus on productivity combined with our long-term market opportunities, we are well positioned to benefit when the economy recovers."

Like other major U.S. railroads, BNSF had reported robust profits in recent quarters as strong pricing helped them offset falling freight volumes. But analysts have warned that a prolonged recession could undermine their pricing power.

Revenues were light, but the demand for products on a large scale is still down. I've been very patient with this stock and have yet to buy any shares. The market continues to price in a recovery that hasn't yet to surface. Tech stocks have been strong, but industrial stocks have been selling hope more than showing results.

The Association of American Railroads released their weekly traffic volume, and it was again weak. Click here to read that report.

The AAR also put out their monthly Rail Time Indicators, which is a really good look at many indicators for rails and the economy. These are the stats we need to be taking cues from when trying to predict what the economy is going to do.

Disclosure: No Positions.

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