BNSF’s Q2 earnings slide 24% on lower freight volumes

BNSF’s net income for the second quarter of 2023 fell 24% year over year (y/y) from $1.66 billion to $1.26 billion. Parent company Berkshire Hathaway attributed the second-quarter earnings decline primarily to lower overall freight volumes and higher nonfuel operating costs, which were partially offset by lower fuel costs.

Total revenues for the western U.S. Class I railroad were nearly $5.83 billion, down 12% y/y on the lower volumes, although revenue per carload was roughly flat.

Breaking down BNSF’s operating segments, volumes for consumer products fell 16% amid lower West Coast imports, the loss of an intermodal customer and competition from lower spot rates in the trucking market, which had impacted domestic intermodal demand, BNSF said. Higher vehicle production did provide some support to BNSF’s consumer products volumes. Revenues for this segment slipped 23% to nearly $1.9 billion.

Agricultural products fell 8% on lower grain exports, although higher volumes of domestic grains, renewable diesel and feedstock partially offset the volume decline, according to BNSF. Agricultural products revenues were down 7% y/y to $1.29 billion.

Industrial products decreased 3% amid lower demand for chemicals, plastics and lumber, as well as lower volumes of petroleum products due to refinery outages, BNSF said. Revenues for this segment slipped 1% y/y to $1.45 billion.

Coal volumes fell 3% on lower natural gas prices and weather-related impacts, while coal revenues fell 6% to $936 million.

Meanwhile, although operating expenses fell 6% y/y to $4.02 billion amid a 35% drop in fuel expenses, other expenses made up the difference. Compensation and benefits expenses rose 13% to $1.39 billion on increased head count, wage inflation and lower productivity, while materials and other expenses grew 33% to $372 million on general inflation, increased casualty and litigation costs, higher property and other miscellaneous taxes, as well as lower gains from land and easement sales, BNSF said.

Operating income for the western U.S. Class I railroad slipped 24% to $1.8 billion.