Burlington Northern Santa Fe: A Dominant Class I Railroad


Nov. 20 2020, Updated 4:33 p.m. ET

A Berkshire Hathaway enterprise

On August 4, 2017, Burlington Northern Santa Fe (or BNSF) filed a Form 10-Q with the SEC (U.S. Securities and Exchange Commission). The filing was for the quarter ended June 30, 2017. The company owns and operates the largest rail network in North America through its wholly owned subsidiary BNSF Railway Company.

BNSF, the holding company, is privately owned by Berkshire Hathaway (BRK.B), whose chair and CEO (chief executive officer) is Warren Buffett. Since BNSF is a privately owned company, analyst recommendations and peer valuations aren’t available. However, we can compare BNSF’s results of operations with other Class I railroads (UNP) for a better industry insight.

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Class I railroads

According to the Association of American Railroads, there are seven Class I railroads operating in the United States. A Class I railroad is defined as a line haul freight railroad with operating revenues of $447.4 million in 2016. Freight volumes in the United States have been picking up slowly in 2017 after falling in the previous year.

In 2016, railroads were struggling to curtail costs amid declining shipments. The total employees of Class I railroads fell 10.0% in 2016 on a year-over-year basis. The combined freight revenue for these railroads was $63.2 billion that year, an 8.5% fall from $69.0 billion in 2015.

Except for Canadian National Railway (CNI) and Canadian Pacific Railway (CP), US-originated rail carriers are covered in the portfolio holdings of the iShares US Industrials (IYJ). IYJ holds 4.6% in key US airlines and 5.6% in prominent railroad companies.

Series overview

BNSF’s railroad operations are reported in the following four segments: consumer products, industrial products, agricultural products, and coal. In this 2Q17 post earnings series on BNSF, we’ll be looking at the operating results for these segments. We’ll also look at the company’s operating margins in the second quarter of 2017.

If you want an update on US Class I railroad companies, you can visit Market Realist’s Railroads page.


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