Burlington Northern Santa Fe Corp. (BNI), commonly known as BNSF, reported fourth quarter earnings of $1.30 per share from continuing operations. Results were ahead of the Zacks Consensus Estimate of $1.22. Earnings were down 31.5% from $1.78 per share last year.

Results were dragged down by lower revenues due to volume declines in coal, construction and consumer-related markets caused by the weak economy. A lower fuel surcharge recovery caused by a decline in fuel costs also strained earnings.

BNSF reported a revenue decline of 16% year-over-year to $3.7 billion due to lower utility coal shipments due to a diminished demand following continuing weakness in steel production and lower global demand for exports. Coal is expected to remain a headwind into 2010 due to low domestic and global demand as well as utility stockpiles that have exceeded target levels.

Operating expense fell to $2.8 billion in the quarter, down 14% compared to the last year. This is due to the company’s ongoing cost-cutting efforts, decreased unit volumes and lower fuel prices.

Operating ratio of 74.9%, though up slightly in the quarter, was down to 76.0% for the full year. The ratio is expected to narrow down gradually as the full benefits of the cost-cutting measures are manifested.

BNSF’s full-year earnings fell 17% to $5.01 per share. Revenue for 2009 dropped 22% to $14.0 billion.
BNSF has been facing depleting volumes due to the global economic downturn. We believe the actions taken by management to improve its network and lower its costs should expand the company’s margins when volumes begin to come back.

We remain optimistic about Burlington’s excellent management team, its revenue mix and its ability to control acquisitive growth. Despite the ongoing market turmoil, we see the company as well positioned to capitalize on the economic turnaround. BNSF is set to become a part of Berkshire Hathaway Inc. (BRKA, BRKB), pending shareholders’ approval in February.

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