UBS Lowers EPS Estimates For Union Pacific, CN Rail and Burlington Northern

While pricing continues to offset weak volume growth for railways, second quarter earnings estimates for Union Pacific Corp. (UNP), Burlington Northern Santa Fe Corp. (BNI) and Canadian National Railway CO. (CNI) may be too aggressive.

As a result, UBS has reduced its earnings per share [EPS] forecasts for those companies and others, and expects consensus estimates will also fall, perhaps due to profit warnings.

While UBS analysts expect both Union Pacific and CN Rail to achieve their own double digit EPS 2007 growth targets, second quarter estimates at UBS were reduced from US$1.71 to US$1.55 and from US$1.01 to US93¢ respectively. Forecasts for Burlington fall US9¢ to US$1.20, but UBS calls the situation there “more problematic” and expects lower guidance from the company in the near term.

Weak housing and automotive markets in the Unites States have lead to a 2.7% decline in year-to-date rail volume, which is twice as bad as the worst year of the last recession in 2001, according to UBS.

The firm remains bullish on Union Pacific, CN Rail and Norfolk Southern Corp. (NSC).