November 9, 2008 Ticker: BNI About Burlington Northern Santa Fe Corporation, incorporated on December 16, 1994, through its subsidiaries, is engaged primarily in the freight rail transportation business. In serving the Midwest, Pacific Northwest and the Western, Southwestern and Southeastern regions and ports of the United States, the company transports a range of products and commodities derived from manufacturing, agricultural and natural resource industries. The Company's freight business consists of consumer products, industrial products, coal and agricultural products. The Consumer Products' consists of three business areas: international intermodal, domestic intermodal and automotive. Industrial Products' consists of five business areas: building products, construction products, petroleum products, chemicals and plastics products, and food and beverages. The Agricultural Products' freight business transports agricultural products, including corn, wheat, soybeans, bulk foods, fertilizer and other products. (Source: Reuters) Earnings The recent earnings reports have beaten the analyst estimates – almost a trend since 2005 (with the exception of Q2 2007 when it missed the analyst estimates by $0.02). Earnings Actual Analyst Estimates Difference Q3 2008 (10/23/2008) $1.91 $1.69 $0.22 Q2 2008 (7/24/2008) $1.34 $1.30 $0.04 Q1 2008 (4/29/2008) $1.30 $1.22 $0.08 The mean analyst estimate for Q4 2008 is $1.81 – and given the Q3 report, it seems likely that it would meet or beat that number (not something we can expect from a lot of companies in the current economy). Cash Flow BNSF has had a positive cash flow – with the Q1 2008 Cash flow per share (CPS) of $2.31 and the Q2 2008 CPS at $2.37. The cash flow has been strong and increasing with the Q4 2005 CPS at $1.76. Annual Revenue and Estimates The annual revenue estimate for the year 2008 has been set at $18.3 billion. So far BNSF has reported the following revenues for 2008 Given the numbers it is very likely that BNSF is set to meet or beat the annual revenue estimates for 2008. BNSF's operating margins - 24.60 %( Sep '08), 22.06 %( 2007) 20.94 %( 2006) are better than the industry numbers - indicating that it controls its costs and expenses better than average. That, in my opinion, is also an indicator of strong, efficient management. Warren Buffett is buying BNI ( The bottom line for many investors) A recent SEC filing noted that Warren Buffett's Berkshire Hathaway (BRK) added to its position in BNI buying an additional 825,000 shares of common stock and now holds a beneficial ownership of 64,610,418 shares of common stock. The SEC filings indicate the price to be in the mid 80s – so here's a company with good revenues, strong cash, decent earnings – and the "price is right" (P/E at the time of writing - 14.11). All these factors make BNI another big dot on my radar.
Burlington Northern (BNI)
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