The improving economy helped higher freight volumes boost first-quarter revenue at BNSF Railway, which also saw profits soar.
Operating income was $1.7 billion, up 11% from the same period in 2017, while operating revenues of $5.6 billion for the Fort Worth-based company gained 8% on unit volume that was better by 5%. Operating expenses for the first quarter of $3.9 billion were up 8% as fuel prices climbed 27% on-year.
The operating ratio was 67.9%, down from 68.8% a year ago.
Net income jumped 37% to $1.14 billion from $838 million, likely a benefit from tax reform legislation passed by Congress in December 2017.
Average revenue per car/unit increased 2% on higher fuel surcharges, primarily driven by higher fuel prices and increased rates per car/unit, partially offset by changes in the business mix.
Higher international and domestic intermodal traffic pushed Consumer Products up 6%, mostly on economic growth and tightening truck capacity leading to conversion from highway to rail. Industrial Products volumes increased 9% due to
increased sand and other products for drilling. The railroad also cited “broad strengthening” in the industrial sector which drove demand for steel, taconite, chemicals and plastics.
Shipments of agricultural products were better by 6%, as export and domestic grain strengthened, along with higher ethanol and other grain products.
Shutdowns of coal-fired power plants led coal volumes 2% lower, partially offset by BNSF’s gains in market share.
The company increased its projected capital spending by $100 million, to $3.4 billion in 2018. Maintenance and replacement costs are tagged at $2.4 billion, while BNSF will spend approximately $500 million on expansion and efficiency projects focused on key growth areas along its Southern and Northern Transcon routes. Another $400 million is budgeted for freight cars and other equipment acquisitions.
BNSF has allocated $100 million to continue implementation of Positive Train Control (PTC). The company said it “completed the installation of PTC on all federally-mandated subdivisions and is currently running hundreds of trains daily with PTC as it tests revenue service across its mandated territory.”