All is not quite working on the railroads

Recently our own Sheldon Liber has posted several very insightful columns summarizing U.S. Class 1 railroads. Here's a bit of follow up information. Winter 2006-2007 was not kind to the railroads. Burlington Northern Santa Fe (NYSE: BCI) has stated it will take an $80 million charge in first quarter 2007, approximately 14 cents per share, due to an increase in environmental compliance costs, $65 million, and the write-off of a technology system, $15 million. These charges against profits will reduce EPS to $0.96, compared to EPS of $1.09 in first quarter 2006. BNSF operates 32,000 miles of rail in 28 states and parts of Canada. It hauls more grain than any other Class 1 railroad, and hauls enough low-sulfur coal to supply 10% of total US electricity generated. Despite recent wintery problems, Warren Buffett, the Oracle of Omaha, thinks BNSF is a good bet. Berkshire Hathaway (NYSE: BRK-A) owns 40 million shares of BNSF, approximately 11% of the total shares. BNSF stock closed at $87.99, down $0.09.

Norfolk Southern (NYSE: NSC) also reported winter problems that will have a negative impact on earnings. Operating 21,000 miles of track in 22 Eastern states, Norfolk Southern saw a 4.4% decline in shipping volume in first quarter 2007 from first quarter 2006. This will result in 3% lower EPS than forecast. Norfolk Southern plans to release first quarter earnings on 25 April 2007. The stock closed at $52.74, down $0.15.