BNSF: A Jewel in Berkshire Hathaway’s Crown

Burlington Northern Santa Fe (or BNSF) owns and operates the largest rail network in North America through its wholly owned subsidiary, BNSF Railway Company. The company manages ~33,000 route miles of track in 28 states in the United States and three Canadian provinces.

BNSF is privately owned by Warren Buffet–headed Berkshire Hathaway (BRK-B). However, BNSF files annual and quarterly filings with the Securities Exchange Commission (or SEC). Our current quarterly information pertains to 10-Q reports filed by the company on November 4, 2016.

Since BNSF is privately held, investors should realize that analysts’ recommendations and peer valuations aren’t available. However, BNSF’s 3Q16 earnings can be compared with those of other US Class I railroad companies in order to make a call on BNSF’s parent company, Berkshire Hathaway.

Union Pacific (UNP) is BNSF’s biggest direct competitor. Both operate in the Western United States. On the eastern side, Norfolk Southern (NSC) and CSX Corporation (CSX) are two Class I rail companies that compete with each other. Kansas City Southern (KSU) is the smallest US Class I rail company. Canadian National Railway (CNI) and Canadian Pacific (CP) are US Class I rail companies with Canadian origins.

All the companies mentioned above except CNI and CP are included in the portfolio holdings of the iShares US Industrials ETF (IYJ). This ETF holds 5.4% in railroad companies and 4.9% in major US airlines.

BNSF reports the results of its operations through four segments: Consumer Products, Industrial Products, Agricultural Products, and Coal.

In this series, we’ll provide an overview of BNSF’s quarterly revenues and segment-by-segment financial results. We’ll also go through the company’s 3Q16 operating margins amid weak railroad industry fundamentals.

For more information on the post-earnings reports of US Class I railroad companies, you can visit Market Realist’s Railroads page.