Burlington Northern's (BNI) Bearish FY10 Outlook Downplayed by Wall Street - Barron's (CSX, NSC, BRK-A, More)

Wall Street should be paying more attention to Burlington Northern's (NYSE: BNI) bearish outlook, a Barron's article reports today. Shares of BNI, CSX (NYSE: CSX), Norfolk Southern (NYSE: NSC), and Union Pacific (NYSE: UNP) have rallied since the proposed $34 billion acquisition of BNI by Berkshire Hathaway (NYSE: BRK-A) was accepted on November 3, 2009.

The management then sent their Board of Directors four potential scenarios for 2010 and beyond. The most optimistic saw the company posting earnings of $5.06 per share, compared to Wall Streets consensus of $5.50 per share. The management then thought that the economy wouldn't recover until 2011, in which case the company would produce an EPS of $4.40 per share for FY10. The other two scenarios saw flat earnings, or the economy entering into a "deep recession."

Shares of Berkshire A are trading at a 1.2x book value multiple, lower than the average of 1.6x book value over the past decade.

With such a quick agreement with Warren Buffett's $100 per share proposal, Burlington believes that the bid represents a full price for the company.

Buffett calls that deal an "all-in wager on the economic future of the U.S." Burlington is a major hauler of coal west of the Mississippi, and is also a major carrier of agricultural commodities.

Wall Street, however, is trying to play down Burlington's forecast, calling the board "conservative." JP Morgan believes that their forecasts may "not provide a good read for other railroads."

Burlington's shipment volume has been down 14% in recent months, compared to 7% drops for other carriers. Shipment volume provides 25% of Burlington's revenue, and it has been down due to utilities, major coal customers, were sitting with 77 days of supply versus a normal supply of 45 days.

Dan Keen, assistant VP of policy analysis at Association of American Railroads say that there will be "no V-shaped recovery at this point. The recovery is shallow."

You May Also Be Interested In

• Seritage Growth Properties (SRG) Makes $50M Loan Prepayment
• Warren Buffet's Berkshire stock target raised at UBS into earnings
• Berkshire Hathaway Raises ¥263.3 Billion From Bond Sale - Bloomberg