BNSF after the bell Thursday reported first-quarter earnings of 86 cents per share, down from $1.30 per diluted share in the first quarter of 2008, as freight revenue fell 20% in the comparable period, from $4.14 billion to $3.31 billion. BNSF’s operating ratio rose to 79.8% in the first quarter from 78.9% in the comparable 2008 quarter.
Wall Street analyst estimates exclusive of any one-time charges were for earnings of 96 cents per share on revenue of $3.68 billion.
The company attributed much of the revenue decline to a decrease in fuel surcharges of approximately $325 million and a $96 million charge in excess of amounts previously accrued related to the unfavorable coal rate decision.
The remaining variance, it said, was due to lower unit volumes as a result of the economic downturn, partially offset by improved yields.
“During the first quarter of 2009, BNSF’s focus on cost control and a variable cost structure enabled us to weather a difficult economic environment,” said BNSF Chairman, President, and Chief Executive Officer Matthew K. Rose. “BNSF continues to manage through the recession and is well positioned to take advantage of the eventual economic recovery."
Morgan Stanley analysts William Greene and Adam Longson agreed with Rose's assesment: "After years of lackluster productivity gains, BNSF's first-quarter 2009 was a breakout. We underestimated the labor cost opportunity and how successful BNSF had been in building a more variable-cost rail model (customers are more likely to own railcars). We've noted for some time that Western rails should outperform Eastern rails. BNSF's quarterly results were impressive no matter how we slice it. We are increasing our 2009 estimate of $4.60 to $4.90 as well as our 2010 EPS forecast from $5.15 to $5.35. Accordingly we are also increasing our price target by $5 to $70 while maintaining our Hold rating. We believe the company is taking the right steps to control costs during a weak freight environment while simultaneously improving service levels."