Union Pacific Corp. reclaimed the title of the biggest U.S. railroad by sales from Burlington Northern Santa Fe Corp., the carrier being acquired by Warren Buffetts Berkshire Hathaway Inc., Bloomberg News reports.
Revenue for Union Pacific fell 21 percent to $14.1 billion in 2009, while Fort Worth, Texas-based Burlington Northerns sales dropped 22 percent to $14 billion. Both railroads posted smaller fourth-quarter profits than a year earlier as the recession curbed shipping demand.
Rising volumes at Union Pacific for agricultural and automotive products and for so-called intermodal shipments that can move goods by rail, road or sea helped pare last quarters sales decline. Chief Executive Officer James Young said the railroad may have seen the worst of an industry freight slump.
Union Pacific is continuing to steal market share in the intermodal business from Burlington, Donald Broughton, a St. Louis-based analyst for Avondale Partners LLC, said yesterday. As long as that trend continues, Im going to continue to be bullish on the stock.
Broughton recommends buying Omaha, Nebraska-based Union Pacific and selling Burlington Northern, whose shareholders will vote Feb. 11 on Buffetts $100-a-share offer for the 77.4 percent of the railroad that Berkshire doesnt already own.
Union Pacific wont alter its strategy because of Buffetts Burlington Northern purchase, Young said. The carriers competitive efforts include focusing on customer service as the railroad vies for shipments in the western U.S.
That isnt changing whether Warren Buffett owns BN or not, he said.
Suann Lundsberg, a spokeswoman for Burlington Northern, said the company does not comment about its competitors.
Union Pacific shares gained $1.72, or 2.7 percent, to $65.45 yesterday in New York Stock Exchange composite trading, bucking a 1.9 percent decline in the broader Standard & Poors 500 Index. Burlington Northern, which reported its results after trading ended, lost 7 cents by 4:51 p.m. from its closing price of $99.25. The shares gained 2 cents in regular trading.
Rails have a chance for growth in freight markets in 2010, Union Pacifics Young said yesterday in an interview. Chances for a strong recovery are slim until job concerns ease, he said.
Railroad volume, considered a leading indicator for economic conditions, fell 16.2 percent for the year, the Association of American Railroads reported on Jan. 7.
Broughton upgraded Union Pacific to a buy rating on Oct. 19 on signs it was winning intermodal business from Burlington.
At the end of 2009, Burlingtons weekly lead in intermodal container shipments over Union Pacific had dwindled to as few as 11,355 from as much as 32,500 in late 2008, Broughton said in a Dec. 30 report.
Intermodal share is important because it produces the highest incremental returns on invested capital by producing more revenue per carload, Broughton wrote.
Its one thing if you steal dirt from my front yard, and its another if you break into my house and take my sterling silver, he said in an interview. For six quarters, UPs been walking around Burlingtons house and taking as much silver, jewels and flat-screen TVs they can get their hands on.
Union Pacifics intermodal performance is mixed, said Kevin Kirkeby, a Standard & Poors equity analyst based in New York. He said the railroad is trading customers a little bit back-and-forth.
Burlington Northern passed Union Pacific at the end of 2008 for the top spot by sales. The railroads compete against each other in the western U.S.
Yesterdays earnings release may be Burlington Northerns last as a public company. Buffetts Berkshire Hathaway, also based in Omaha, said Nov. 3 it agreed to buy Burlington Northern in the companys largest takeover under the 79-year-old investor.
The $26 billion deal was an all-in wager on the economic future of the United States, Buffett said at the time.
Buffett began building his stake in 2006 and already was the top shareholder before agreeing to buy the rest of the railroad.
Buffett told Burlington Northern employees he bought the railroad partially because of its position in the U.S. West, where Union Pacific is its main competitor.
I think the West is going to do well, Buffett told workers during an in-house interview with the railroads chief executive officer, Matthew Rose. Id rather be in the West than the East.
CSX Corp. and Norfolk Southern Corp., the No. 3 and 4 railroads by annual revenue, mainly compete in the eastern half of the U.S.
Jacksonville, Florida-based CSX said Jan. 19 that fourth- quarter net income rose 23 percent to $305 million. Norfolk Southern is scheduled to report earnings Jan. 27.
(This item was distributed by Bloomberg News Jan. 22, 2010.)
BNsf stopped competing with UP when it bought sf, and brought Krebs & Co. aboard as 'top managers.' That bunch was only interested in lining their pockets, and building up the sf side.
Krebs ripped off millions, and he and then CEO of BN, Jerry Grinstein beat it outa Dodge...laughing all the way to the bank!
BNsf is not a real railroad. It's a pretend railroad...that runs in spite of itself!
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