BNSF posts higher Q1 revenue, income

BNSF Railway Co.'s first-quarter revenue rose 8.8 percent to $5.2 billion and pre-tax earnings increased 6.9 percent to $1.3 billion compared with the same quarter a year ago, the Class I's parent Berkshire Hathaway Inc. reported late last week.

BNSF posted operating income of $1.6 billion, an increase of 6 percent, and net income of $838 million, an increase of 7 percent, compared with operating and net income in first-quarter 2016.

The quarter's revenue reflected a 2.7 percent year-over-year increase in average revenue per car/unit, and a 6.4 percent increase in volume, according to the parent company's 10Q filing with the Securities and Exchange Commission.

By commodity, the Class I posted Q1 2017 freight revenue of:
• $1.7 billion from consumer products, up 8.8 percent compared with the year-ago period. Consumer product volume benefited from higher domestic and international intermodal, and automotive volumes.
• $1.2 billion from industrial products, up 3.9 percent compared with last year's Q1. The increase was primarily the result of higher average revenue per unit. Overall, industrial product volumes were slightly higher in Q1 2017 than they were in Q1 2016. BNSF experienced volume increases in minerals and other commodities that support domestic drilling activity and decreases in petroleum products volume due primarily to a displacement of U.S. crude-oil traffic, as well as lower plastics volume.
• $1.1 billion from agricultural products, up 5.7 percent compared with a year ago. The railroad attributed the gain primarily to higher average revenue per unit, as well as volume growth of 1.8 percent. During Q1 2017, the railroad posted higher grain exports that were partially offset by lower domestic grain shipments.
• $960 million from coal, up 23.2 percent in Q1 2017 compared with a year ago. The coal revenue increase reflected an 18.5 percent increase in volumes and higher average revenue per unit. Higher coal volume in the quarter resulted from mild winter weather in Q1 2016 and higher natural gas prices in Q1 2017.

BNSF's operating expenses rose 9.9 percent to $3.6 billion in Q1 2017 compared with last year's first quarter. The railroad's operating ratio rose 0.7 percentage points to 69.2 percent.

Year over year, operating expenses rose because of higher compensation and benefit costs (up 6.2 percent) and higher fuel expenses (up 53.2 percent). Depreciation expense climbed 10.2 percent due to a larger base of depreciable assets in service.