BNSF profitability improvement: Abel wants higher operating margin

BNSF profitability improvement is now a clear priority for Berkshire Hathaway CEO Greg Abel, who says the railroad must close its operating-ratio gap with other Class I railroads, as reported by Trains.com.

In his first annual letter to shareholders released Saturday (Berkshire Hathaway letter (PDF)), Abel pointed to better efficiency and service. Still, he said the company needs stronger financial performance.

BNSF profitability improvement and the operating-ratio gap

Abel wrote that BNSF continues to perform well from a safety standpoint while also tightening up how the network runs. “In 2025, shipments spent less time idling at terminals and moved through the network faster than in nearly any year in the company’s history,” Abel noted. Meanwhile, he said the operational gains need to show up more clearly in the railroad’s financial results.

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“These gains matter, but they are not enough; more progress is needed to translate operational improvements into stronger financial results,” Abel wrote. In addition, he said Berkshire Hathaway views operating margin—described in the letter as the inverse of the industry’s operating ratio—as the best measure of performance.

BNSF operating margin 2025 and the Union Pacific benchmark

In 2025, BNSF’s operating margin improved to 34.5% from 32.0% in 2024, a result Abel said remained only modestly above the railroad’s five-year average. He also returned to the BNSF vs Union Pacific operating ratio comparison, noting that BNSF’s 2025 operating ratio of 65.5% was 5.7 points behind Union Pacific’s 59.8% (Berkshire Hathaway 2025 annual report (PDF)).

“The gap to the industry’s best remains too wide and closing it will require continued improvements in efficiency and service. Each one-percentage-point improvement in operating margin generates approximately $230 million of incremental operating cash flow for our owners,” Abel wrote. “The team recognizes the significance of this opportunity, and we will be disappointed if we do not deliver a substantial improvement over the next few years.”

Berkshire Hathaway letter signals continuity on autonomy

Alongside the performance message, Abel’s Berkshire Hathaway letter indicated that core principles long associated with Chairman Warren Buffett remain intact, including allowing Berkshire’s operating companies a large degree of autonomy. At the same time, the message kept the focus on pushing for sharper operating and financial execution.

Cash flow, dividends, earnings, and segment volumes

Separately, financial results in the letter showed BNSF produced $8.1 billion in net operating cash flows last year and returned $4.4 billion to Berkshire in dividends, slightly above the five-year average of $4.1 billion (Berkshire Hathaway 2025 annual report (PDF)). Operating earnings rose 7.8% to $8.05 billion on flat revenue of $23.3 billion, while net earnings increased 8.8% to $5.47 billion. Operating expenses declined 3.7%.

Overall traffic volume was relatively flat for the year, with a 0.3% increase over 2024, and three of BNSF’s four business segments posted gains. Consumer products volume—covering intermodal and automotive traffic—rose 1.2%, driven mainly by higher intermodal shipments linked to higher West Coast imports and a new intermodal customer, plus higher automotive vehicle volumes.

Industrial products volume fell 4.6% amid declines in construction products, plastics, and petroleum products. Agriculture and energy products shipments increased 3.2% on higher grain exports and petroleum fuel shipments, partly offset by lower domestic grain and feed volumes. Coal traffic was up 1.1% as higher natural gas prices made coal more competitive for electricity generation.

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