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BRK-B · Forward model · BNSF Railway · Bear case

What has to happen in BNSF Railway

Model as of

This page changes BNSF Railway inside the complete BRK-B model. Every other vertical, corporate programme and valuation assumption stays in the selected portfolio case.

BRK-B forward model
Horizon
Consolidated fair value $459.71 all other verticals held in this portfolio case
Final-quarter revenue $7.22B 7% of company revenue
Explicit segment contribution $32.52B EBITDA less segment capex, before corporate items

The basis quarter is a benign one and three disclosed items say so. There was NO significant catastrophe event — none over $150M — in the first six months of 2026, against $1.1 billion of Southern California wildfire losses in 1H 2025, and underwriting earnings still fell 13.1%. On top of that, $1.5 billion of favourable prior-accident-year development was taken in the half, $268M of it at GEICO and $609M at BH Reinsurance in the quarter alone — a release of reserves, not a rate. And PacifiCorp's 2020 Oregon and 2022 McKinney wildfire litigation is live and unresolved in Note 22. This case takes underwriting back below its through-cycle margin, marks Pilot down to roughly its 0.30% trailing-twelve-month margin, charges BHE and the industrials a point for a wildfire accrual and for the $2,084M of energy production tax credits a policy change could remove, and re-rates the operating businesses to a 10x exit at a 10.5% cost of equity. WHAT THIS CASE CANNOT DO, and it is the larger risk: netCash is fixed at a 30 June 2026 mark on a $323,779M equity book carrying $217,258M of unrealised gains, and the engine cannot move it per scenario. A 20% drawdown in that book is $64,756M gross; the deferred tax liability falls with it by $14,764M, so netCash falls $49,992M — $23.28 a share, 4.5% of fair value — with nothing in the DCF moving at all. Subtract that by hand from every case on this page. Result: $459.71 a share, -8.7%.

BNSF Railway

Basis quarter$6.60B
Final quarter$7.22B
Implied CAGR+2%
Final revenue mix7%

Freight rail revenue on volume and rate against compensation, fuel, depreciation and BNSF's own interest expense. $6,601M of revenue and $2,061M of pre-tax earnings in the basis quarter, a 31.22% margin. Because segment earnings are struck after BNSF's interest, this is already an equity-level stream rather than an EBIT one, which is what lets the whole model be discounted at a cost of equity.

Last four quarters
2025 Q3 $6.04B Reported
2025 Q4 $6.00B Estimated
2026 Q1 $5.99B Reported
2026 Q2 $6.60B Reported
Freight rail transportation revenuesOther rail revenues
Sequential growth +1.0%/qtr decaying toward +0.6% 1.0% a quarter. Trailing-twelve-month revenue growth was 4.42% on volume and improved operating efficiency.
BNSF Railway

Latest: $7.22B (2031Q2E)

Period Value
2022Q1 $5.97B
2022Q2 $6.64B
2022Q3 $6.69B
2022Q4 $6.59B
2023Q1 $6.02B
2023Q2 $5.83B
2023Q3 $5.85B
2023Q4 $6.18B
2024Q1 $5.66B
2024Q2 $5.80B
2024Q3 $5.94B
2024Q4 $6.17B
2025Q1 $5.72B
2025Q2 $5.77B
2025Q3 $6.04B
2025Q4 $6.00B
2026Q1 $5.99B
2026Q2 $6.60B
2026Q3E $6.65B
2026Q4E $6.69B
2027Q1E $6.73B
2027Q2E $6.77B
2027Q3E $6.81B
2027Q4E $6.84B
2028Q1E $6.87B
2028Q2E $6.90B
2028Q3E $6.94B
2028Q4E $6.96B
2029Q1E $6.99B
2029Q2E $7.02B
2029Q3E $7.05B
2029Q4E $7.07B
2030Q1E $7.10B
2030Q2E $7.13B
2030Q3E $7.15B
2030Q4E $7.17B
2031Q1E $7.20B
2031Q2E $7.22B

Assumptions & reasoning

  • 31.22% in the basis quarter, 31.02% over the trailing twelve months, 29.65% across all ten quarters of ASU 2023-07 history: the most stable margin in the company, which is why terminal sits within 20bp of the basis quarter.
  • The quarter was helped by volume and operating efficiency and hurt by fuel, which rose from $698M to $1,173M year on year. Neither is extrapolated: the growth rate is set below the trailing 4.42% and the margin is held flat.
  • Left ASEASONAL by the mechanical rule and it was close. Ratio-to-centred-four-quarter-moving-average factors are [0.9712, 0.9800, 1.0152, 1.0335] with a signal of 0.0623 against a worst window-to-window spread of 0.0604 — the signal clears the spread by 1.03x, a tie inside estimation noise, so no factors are applied.
  • Segment earnings before income taxes are struck after this segment's OWN interest expense. The seven segments' interest lines sum to $1,437M in the basis quarter against $1,335M of CONSOLIDATED interest expense, so every dollar of Berkshire's interest cost is already charged inside a vertical margin. That is why no debt is netted in spec.netCash: subtracting the $128,599M of borrowings as well would take the same cost twice.
  • Berkshire files no fourth-quarter report. Every Q4 point here is the annual figure less the nine-month figure from that year's third-quarter 10-Q and is flagged estimated for that reason; Q1, Q2 and Q3 are read directly from the filed segment notes and are not.
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