A private company
On November 3, 2017, Burlington Northern Santa Fe (or BNSF) filed a Form 10-Q with the SEC (U.S. Securities and Exchange Commission). BNSF, a holding company, is privately owned by Berkshire Hathaway (BRK.B), which is headed by Warren Buffet. The former owns and operates the largest rail network in North America through its subsidiary BNSF Railway Company.
BNSF filed a 10-Q for the quarter ended September 30, 2017. Since the company is privately owned, analyst recommendations and peer valuations are not available. You can compare BNSF’s operating results with other Class I railroads (CSX) to gauge the railroad industry’s dynamics.
Class I railroad freight trends
Beginning in 2017, the freight traffic of the seven US Class I railroads showed signs of revival, possibly leaving behind the dismal previous year. A Class I railroad is defined as a line haul freight railroad with operating revenues of $447.4 million in 2016. Compared with railcars, intermodal traffic growth was far better year-over-year in 2017. But the overall freight volumes are still way behind the shipment levels in 2014 and 2015. These railroads’ freight growth trajectories were also halted due to the recent hurricanes that affected shipment growth.
All the major railroads of US origin are included in the portfolio of the iShares US Industrials (IYJ). IYJ doesn’t cover Canadian rail freight carriers such as Canadian National Railway (CNI) and Canadian Pacific Railway (CP). IYJ holds 5.9% in key US railroad companies and 4.6% in prominent airlines (DAL).
BNSF operates in four segments: Consumer Products, Industrial Products, Agricultural Products, and Coal. In this 3Q17 post-earnings series, we’ll examine the operating results for all these segments. Then we’ll compare BNSF’s 3Q17 operating margins with its Class I peers.