BNSF boosts revenues, lowers OR

BNSF locomotive.jpg

A decrease in coal volumes did not slow a revenue rise at BNSF Railway Company, which posted a 16% increase in operating revenues in the third quarter compared to Q3 2017. Total revenues in Q3 totaled $6.15 billion. For the nine months ending Sept. 30, 2018, revenue was up 12% to $17.6 billion.

The revenue increase led to a lower operating ratio in Q3 of 64.5% compared to Q2’s 66.8%. It was up from 62.4% in Q3 2017. For the nine months ending Sept. 30, 2018, OR is 66.4%, up slightly from 65.5% in the same time period in 2017.

Net income posted a 34% increase to $1.3 billion, up from $1 billion even as operating expenses climbed 20% over Q3 2017 to $4 billion. Operating income was up 9% to $2.1 billion.

BNSF said that average revenue per car/unit increased 11% to $2,137 per car unit. For the year, average revenue per car/unit is up 6%, attributed to higher fuel surcharges and increased rates per car/unit, the railroad said.

Fuel cost overall increased to $859 million in the quarter, up from $595 million a year ago. Locomotive fuel price per gallon increased 36% in the third quarter to $2.31 per gallon.

Average revenue per car/unit for coal, which made up 18.% of total carloads in Q3, increased 11% even as coal volume fell 5%. Coal revenue increased 6% to $1.07 billion. Agricultural products volume increased 16% and industrial product volumes were up 13% year-over-year. Revenues were up 17% and 24%, respectively.

BNSF benefitted from tight truckload capacity in the quarter as consumer product revenues jumped 12% year-over-year to $2 billion on a 1% volume increase.

“The increases were driven by economic growth and tight truck capacity leading to conversion from highway to rail, as well as growth in imports and containerized agricultural product exports, partially offset by a contract loss,” the company noted.

BNSF reported a total of 2.14 million carloads in Q3.

The company also said that purchased transportation services increased 18% in Q3 compared to a year-ago due to “higher purchased transportation costs of our logistics services business, which are offset in other revenues, as well as increased intermodal ramping, drayage, and other volume-related costs,” it said.

Compensation and benefits also increased, likely due to the competition for workers, rising 17% year-over-year to $1.4 billion.

BNSF is privately held by Warren Buffett's Berkshire Hathaway (NYSE: BRK)