BNSF Quarterly Profit Slips on Fuel Charges

U.S. railroad Burlington Northern Santa Fe said on Tuesday that quarterly net profit fell as a result of higher fuel expenses.

The Ft. Worth, Texas-based company reported second-quarter net income of $433 million or $1.20 a share, compared with $471 million or $1.27 a share a year earlier.

Wall Street analysts had on average expected earnings per share for the quarter of $1.22, according to Reuters Estimates.

Total revenues increased about 4% to $3.84 billion.

Core freight revenues also rose 4% to $3.74 billion as demand for petroleum products, chemicals and plastic products offset a decline in building and construction products.

But those gains were erased by a more than 5% jump in operating expenses during the quarter, driven by higher fuel expenses.

Even so, Don Hodges, the president of Hodges Capital Management, said the results suggested that BNSF retained pricing power in some of its strongest markets, including coal and chemicals, where revenues rose even though unit volumes were flat.

"I'm not alarmed by the 2 cent miss," Hodges said. "They're going to have some lumpy quarters. Their real problem area is construction equipment and building materials."

The company expects 2007 earnings per share growth to be in the low single digits on an adjusted basis, it said in a presentation on its Web site. It expects third quarters earnings per share to rise 5%.