Burlington Northern Santa Fe (BNI) Valuation

Company Profile (obtained from Google Finance): Burlington Northern Santa Fe Corporation (BNSF) is a holding company. The Company, through its subsidiaries, is engaged primarily in the freight rail transportation business. BNSF Railway Company (BNSF Railway) is the Company’s principal operating subsidiary. BNSF Railway operates various facilities and equipment to support its transportation system, including its infrastructure and locomotives and freight cars. It also owns or leases other equipment to support rail operations, including containers, chassis and vehicles. Support facilities for rail operations include yards and terminals throughout its rail network, system locomotive shops to perform locomotive servicing and maintenance, a centralized network operations center for train dispatching and network operations monitoring and management in Fort Worth, Texas, regional dispatching centers, computers, telecommunications equipment, signal systems and other support systems.

ModernGraham Comments: None at this time.

Defensive and Enterprising Investor Tests:

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 6/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass at least 4 of the following 5 tests: Score = 3/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – FAIL
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary:

  • Last updated 9/26/09
  • MG Value = $177
  • MG Opinion = Undervalued
  • Value based on 3% Growth = $74
  • Value based on 0% Growth = $43
  • Market-implied growth rate = 3.67%
  • Net Current Asset Value (NCAV) = -$2.52
  • Current Ratio = 0.75
  • Price to Book Ratio = 2.31

Key Data:

Balance Sheet – 6/30/2009

    • Current Assets    $2,579,000,000
    • Current Liabilities    $3,435,000,000
    • Total Debt    $9,283,000,000
    • Total Assets    $37,372,000,000
    • Intangible Assets    $0
    • Goodwill    $0
    • Total Liabilities    $25,521,000,000
    • Outstanding Shares    340,000,000

      Earnings Per Share – Diluted

      • 2009 (estimate) – $4.48
      • 2008 – $6.08
      • 2007 – $5.10
      • 2006 – $5.11
      • 2005 – $4.02
      • 2004 – $2.10
      • 2003 – $2.09
      • 2002 – $2.00
      • 2001 – $1.87
      • 2000 – $2.36
      • 1999 – $2.44

      Earnings Per Share – Modern Graham

      • 2009 (estimate) – $5.08
      • 2008 – $5.08
      • 2007 – $4.29
      • 2006 – $3.61
      • 2005 – $2.71
      • 2004 – $2.06

      Valuation History:

      • 9/26/09 – Value $177, Actual Price $80.57, Undervalued & Defensive
      • 6/25/09 – Value $184, Actual Price $74.91, Undervalued & Defensive
      • 1/9/07 – Value $67, Actual Price $72, Fairly Valued & Enterprising

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