Union Pacific, Burlington Northern profits beat analysts estimates
(Bloomberg News circulated the following story by Angela Greiling Keane on April 23, 2009.)
WASHINGTON, D.C. Burlington Northern Santa Fe Corp. and Union Pacific Corp., the two biggest U.S. railroads, said profit dropped less than analysts expected as savings from job cuts and lower fuel costs helped offset slower shipping demand.
Burlington Northerns first-quarter profit fell 36 percent to $293 million, or 86 cents a share, the company said today in a statement. Union Pacifics net income decreased 18 percent to $362 million, or 72 cents.
Freight-shipping declines reported by both railroads reflect the toll of slower consumer and corporate spending that pared freight demand as the U.S. recession entered its second year. In response, carriers have been running fewer trains to rein in spending, and Union Pacific said today it plans to pare as many as 4,000 more positions.
Weve taken action in trying to right-size our business for demand, Union Pacific Chief Executive Officer James Young said in an interview.
The company will eliminate 3,000 to 4,000 more jobs by the end of 2009 through attrition, Young said.
Union Pacific rose $1.83, or 3.8 percent, to $49.55 at 4 p.m. in New York Stock Exchange composite trading. The shares have risen 3.7 percent this year.
Burlington Northern climbed $1.42, or 2.1 percent, to $67.85. The company reported earnings after the close of regular U.S. trading.
Burlington Northern
Burlington Northerns revenue fell 20 percent to $3.42 billion. Net income a year earlier was $455 million, or $1.30.
The company laid off about 2,000 workers as of Jan. 21 and said at the time it planned about 500 more furloughs shortly.
Weve done a good job of matching employee strength to volumes, CEO Matt Rose said today on a conference call with analysts. He declined to comment on future layoffs or furloughs.
Excluding costs related to interest-rate hedges and penalties stemming from a regulators decision on coal rates, the carrier would have had a profit of $1.13 a share, according to Bloomberg calculations. On that basis, profit beat the 96- cent average of estimate of 17 analysts in data compiled by Bloomberg.
In February, the Surface Transportation Board said Burlington Northern must give $345 million in reparations and rate cuts to two electric utilities for overcharging them to ship coal.
Union Pacifics profit of 72 cents a share compares with the 68-cent average of five analysts estimates compiled by Bloomberg.
The carriers sales for the quarter fell 20 percent to $3.4 billion. Net income in the year-ago quarter was $443 million, or 85 cents a share.
Union Pacific trimmed its workforce 8 percent from a year earlier and said in January it would run 25 percent fewer trains as the recession slowed shipments of coal, automobiles and consumer goods.
Challenging Environment
We experienced one of the most challenging business environments we have ever seen, Young said on a conference call with analysts today. Our efforts in the quarter focused on reducing costs.
The carrier said it had 44,997 employees on average in the quarter, down from 49,073 in the year-earlier period. About 4,500 locomotive operators are on furlough, said Tom Lange, a company spokesman.
The key question in our mind is how aggressive UP will be on cost-cutting after trimming too much in 2002 and 2003, Rick Paterson, an analyst at UBS Securities LLC in New York, said in a report today. He rates Union Pacific shares a buy.
The railroad will be ready when the economy turns around, which it doesnt expect until next year, Young said in the interview.
Ive got $5 billion worth of assets sitting idle -- 2,000 locomotives, 60,000 freight cars, Young said. Ive got almost 5,000 employees furloughed, sitting by, ready to go.
Canadian Pacific
Canadian Pacific Railway Ltd., Canadas second-largest railroad, said earlier today that first-quarter profit fell 31 percent to C$62.5 million ($50.7 million), or 39 cents a share.
The carrier rose $1.41 to C$42.41 in Toronto Stock Exchange trading.
CSX Corp., the third-biggest U.S. carrier, and Canadian National, that countrys largest railroad, said this month that net income fell less than analysts had expected. Norfolk Southern Corp., the fourth-biggest U.S. railroad, said this week its net income fell more than analysts had had forecast.
