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BNSF’s Q3 net profit slips 6% despite 16% increase in revenue

Higher costs eat away at rail carrier’s net income

BNSF reported third-quarter 2022 earnings. (Photo: Jim Allen/FreightWaves)

Despite total revenues growing by 16% in the quarter, a 30% increase in costs dented BNSF’s net profits for the third quarter of 2022.

Net income was $1.44 billion in the third quarter of 2022, a 6% decrease from $1.54 billion in the third quarter of 2021, according to BNSF’s filing to the U.S. Securities and Exchange Commission. Western U.S. rail carrier BNSF is privately owned by Berkshire Hathaway (NYSE: BRK.B).

Third-quarter revenues were $6.69 billion, compared with $5.79 billion in the same period last year. 

But third-quarter operating expenses ballooned to nearly $4.59 billion, compared with $3.53 billion a year ago, as higher average fuel prices led to an 80% increase in fuel expenses. Fuel expenses were $1.27 billion. 

A 26% increase in compensation and benefits costs to nearly $1.5 billion also contributed to the quarter’s higher costs. These costs rose due to wage inflation and the impact of tentative or ratified union labor agreements.

As a result, BNSF’s operating ratio rose to 67.7% in the third quarter, compared with 59.5% a year ago. Berkshire Hathaway defines OR as the ratio of railroad operating expenses to railroad operating revenues. 

Although BNSF handled 5% fewer volumes in the third quarter, average freight revenue per unit rose 23% to $2,623, which helped support higher revenues overall. 

All of BNSF’s business units posted year-over-year revenue gains. Consumer products revenues rose 15% to $2.42 billion, although volumes fell 7% because of lower international intermodal shipments resulting from supply chain challenges, BNSF said.

Agricultural products revenues gained 26% to nearly $1.34 billion, with volumes increasing 4% on higher domestic grain shipments and renewable diesel and oil feedstock shipments. 

Industrial products revenues grew 7% to $1.47 billion, although volumes slipped 15% amid lower demand for shipments of crude by rail and lower building products shipments.

Coal revenues jumped 27% to $1.1 billion, although coal volumes slipped 1% on network challenges, according to BNSF.

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Joanna Marsh

Joanna is a Washington, DC-based writer covering the freight railroad industry. She has worked for Argus Media as a contributing reporter for Argus Rail Business and as a market reporter for Argus Coal Daily.