BNSF’s Q3 net income drops 15% on lower revenues

Declining grain exports and competition from lower spot rates in the trucking market were among the factors that led BNSF to post a 15% decline in net profits for the third quarter of 2023.

The Western U.S. Class I railroad, which is owned by Berkshire Hathaway (NYSE: BRK-B), reported net income of $1.22 billion for the third quarter of 2023, compared with $1.44 billion for the third quarter of 2022.

Freight revenues slipped 12% year over year (y/y) to $5.59 billion amid lower volumes, while average revenue per car/unit fell 7% on decreased rates and lower fuel surcharges but was offset by positive business mix, BNSF said. Overall operating revenues totaled $5.85 billion, down 13% from the third quarter of 2022.

Volumes for BNSF’s consumer products segment slipped 7% y/y amid lower West Coast imports, the loss of an intermodal customer and competition from lower spot rates in the trucking market, which impacted domestic intermodal demand, BNSF said in a news release issued over the weekend. But higher automotive volumes amid an increase in vehicle production partially offset the volume decline for consumer products.

Agricultural products volumes also fell, declining 3% y/y on lower grain exports. But increased grain consumption for domestic use helped offset the decline in export volumes.

Lower natural gas prices and weather-related impacts contributed to a 6% decline in coal volumes y/y.

But not all of BNSF’s segments posted volume losses. Industrial products volumes grew 1% on increased demand for construction products from infrastructure demand, partially offset by lower demand for plastics, chemicals and sand, BNSF said.

Meanwhile, BNSF’s operating income was $1.8 billion, down 14% y/y, while the operating ratio was 68.4%, compared with 67.7% for the third quarter of 2022. Investors sometimes use OR to gauge the financial health of a company, with a lower OR implying improved health.

Expenses were $4.04 billion for the third quarter, down 12% from nearly $4.59 billion a year ago and driven largely by a 32% decline in fuel expenses.