Burlington Northern Santa Fe Corp., the nation's second-largest railroad operator, said Tuesday its profit surged in the third quarter on strong demand for freight shipping and fourth-quarter earnings per share would rise 25 percent from a year ago.
FORT WORTH, Texas — Burlington Northern Santa Fe Corp., the nation’s second-largest railroad operator, said Tuesday its profit surged in the third quarter on strong demand for freight shipping and fourth-quarter earnings per share would rise 25 percent from a year ago.
Shares of Burlington Northern rose $2, or 3.4 percent, to $61 in afternoon trading on the New York Stock Exchange.
Burlington Northern said it earned $414 million, or $1.09 per share, in the July-September period, up from $2 million, or a penny per share, a year earlier. Last year’s results included an after-tax charge of $288 million, or 76 cents per share, related to estimated asbestos and environmental liabilities.
Burlington’s profit beat the $1 per share forecast of analysts surveyed by Thomson Financial.
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Revenue rose to $3.32 billion from $2.79 billion a year ago and above the $3.2 billion expected by analysts.
The company said fourth-quarter earnings per share would rise 25 percent from a year ago, which would put profit at about $1.14 per share, above Wall Street’s current estimate of $1.10 per share.
The Fort Worth-based company said third-quarter freight revenue increased 18 percent from a year ago, to $3.22 billion. Revenue from shipping coal, industrial goods and consumer products all set records for a three-month period, and agricultural-goods business was also strong, executives said.
“Demand for rail transportation continues to outpace the rest of the economy,” said Matthew K. Rose, chairman, president and chief executive.
The company said it expected freight revenue to grow by a mid-teens percentage in the fourth quarter.
Fuel is a major expense for railroads, and Burlington Northern said it was more successful at recouping the added cost of higher fuel prices. Fuel surcharges raised $296 million compared to $95 million a year ago.
Still, officials said the surcharges covered only 70 percent of Burlington Northern’s higher fuel expense, and they hope to recoup nearly 80 percent next year. Analysts expect the company to tack surcharges on just about all contracts that come up for renewal.
An improving economy has increased shipping of goods, and limited rail capacity has allowed railroads to raise their rates, said Andrew West, an analyst for Standard & Poor’s. He added that high-margin coal shipments, which have been crimped by maintenance work on a track operated by Burlington Northern and Union Pacific Corp., should also increase.
West predicted that Burlington Northern revenue would jump 16 percent next year and 8 percent in 2006, and he also raised his estimates of future earnings.
James Valentine, an analyst for Morgan Stanley, said Burlington Northern’s “impressive” results confirmed that higher rail rates are more than cyclical, which he said was good news for Union Pacific, the nation’s largest railroad, and CSX Corp. and Norfolk Southern Corp.
Burlington Northern officials said they would use profits to pay down debt and increase dividends and share buybacks. If profits are especially strong, the company will put more emphasis on capital improvements, Rose said.
“We believe our shareholders want us to grow this business,” he said.
The railroad trails Union Pacific in size.