Earnings estimates for Berkshire Hathaway's BNSF railroad acquisition could signal weaker-than-anticipated U.S. industrial activity in 2010, reports Barrons financial weekly.
Railroads, which transport more than 40 percent of U.S. freight, are often used as a gauge for the industrial sector, the report said.
Major indexes now match -- or are close to matching -- 2009 highs, and many industrial stock valuations suggest significant recovery, Barron's said.
By contrast, BNSF managements' most optimistic earnings forecast is short of Wall Street estimates. Management forecasts best-case earnings of $5.06 in 2010, compared with Wall Street consensus estimates of $5.50 per share, according to the report.
Managers said it was more likely that the economy would not begin its recovery until 2011, causing the railroad shares to earn only $4.40 in 2010, Barron's said.
The weak forecasts suggest Berkshire may have overpaid for BNSF, according to the report. BNSF shares are currently trading at about $98.40, below Buffett's $100 bid, the report said.
JPMorgan railroad analyst Thomas Wadewitz wrote recently that BNSF's management may be conservative and may not provide a good read of the other railroads. But the assistant vice president for policy analysis at the Association of American Railroads, Dan Keen, said that there is no V-shaped recovery, and that the recovery is shallow.
(The preceding article was published by Barrons financial weekly.)
I heard Warren looked out to about 50 years on his investment. These guys only look about 3 months ahead. They are the type that got us into this mess.
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I started ophph with nuthin, and I can safely say I have most of it left.... <img
