New Berkshire chief executive: BNSF must boost its financial performance

BNSF Railway Urged to Narrow Profitability Gap

In his inaugural annual letter to shareholders, Greg Abel, the new CEO of Berkshire Hathaway, emphasized the importance of BNSF Railway closing the profitability gap with its Class I railroad competitors.

Abel noted that BNSF (BRK-B) has made strides in safety, operational efficiency, and service quality. He highlighted that in 2025, trains spent less time waiting at terminals and moved through the network more swiftly than in nearly any previous year.

Despite these advancements, Abel stressed that further progress is essential to convert operational gains into stronger financial outcomes. He identified operating margin as the key metric for performance, reporting that BNSF’s operating margin rose to 34.5% in 2025 from 32.0% the prior year, only slightly above the five-year average.

Greg Abel succeeded Warren Buffett as Berkshire Hathaway’s CEO in January, continuing the company’s tradition of granting significant independence to its subsidiaries.

Financial Performance and Industry Comparison

BNSF’s operating ratio for 2025 stood at 65.5%, trailing Union Pacific’s (NYSE: UNP) industry-leading 59.8% by 5.7 percentage points.

Abel pointed out that closing this gap will require ongoing improvements in efficiency and service. He explained that each percentage point increase in operating margin could generate around $230 million in additional operating cash flow for shareholders. Abel expressed confidence in the team’s commitment to achieving significant progress in the coming years.

Key Results for 2025

• BNSF generated $8.1 billion in net operating cash flow and returned $4.4 billion in dividends to Berkshire, slightly above the five-year average of $4.1 billion.
• Operating earnings climbed 7.8% to $8.05 billion, while revenue remained steady at $23.3 billion.
• Net earnings increased by 8.8% to $5.47 billion, and operating expenses fell by 3.7%.

Business Segment Highlights

• Total rail volume was nearly unchanged, up just 0.3% from 2024.
• Three out of four business units saw volume growth.
• Consumer products, including intermodal and automotive shipments, rose 1.2%, driven by higher West Coast imports, a new intermodal customer, and increased automotive traffic.
• Industrial products volume dropped 4.6%, mainly due to reduced shipments of construction materials, plastics, and petroleum products.

Additional Segment Performance

• Agricultural and energy shipments grew by 3.2%, supported by higher grain exports and increased petroleum fuel transport, though domestic grain and feed volumes declined.
• Coal shipments increased by 1.1%, as elevated natural gas prices made coal a more attractive option for power generation.