Acquiring Burlington is a huge asset: Buffet
Every year Warren Buffet sends an annual letter to all Berkshire shareholders. In it, Buffet explains the investing methods adopted in a better manner. Recently, Buffet commented on the recent acquisition of Burlington Northern. In January, an analyst commented on Burlington Northern at Barron. He said that when the economy was recovering from the depression stage last year, in November 2009, the company offered a premium of 33% to the 77.4% of the company which they didn't own. The premium amounted to $26.4 billion, which was a generous step taken by the company.
He proposed that if we have a closer look and analyze the company's past performance, its present working conditions, then its administrative work, the earnings of Burlington Northern are expected to rise by 15% from the previous year. Even after deducting all the taxes, the company is earning a handsome amount of $3 billion. In the third quarter, the net profit of the company was estimated to be $706 million. Burlington Northern is estimated to be a $40 billion to $45 billion Company and Berkshire bought this company at just eleven times the projected profits of 2011.
In the annual letter Buffet talked about its early acquisition and said that they were happy with it. The letter also said that the company didn't expect this much return which is much more than they had thought. The acquisitions have worked in their favor and everything is going well. With this much return, the earnings of the company are expected to increase by 30 % after deducting taxes. The main advantage with the railroad company that is Burlington Northern Santa Fe (BNSF) is that it is much better than trucking. BNSF freight carried a ton over 500 miles on one gallon of diesel. This is three times better than trucking and much more cost efficient. Thus, the operating cost of the company will be less. It also has an advantage that it doesn't create pollution as trucking does, thus it is an eco-friendly freight carrier.
One could see that as time progresses and the movement of goods increases in the US, BNSF will gain the full share in the movement of goods. Thus, we can even conclude that when the traffic or the movement of goods will be done by rail, society will be benefited.
To have a benefit from the railroads, the companies need to invest more, and until now one could see that only Berkshire can invest. Statistics reveal that movement of 42% of freight takes place through rail in the United States, and BNSF accounts 28% of the total share.
He proposed that if we have a closer look and analyze the company's past performance, its present working conditions, then its administrative work, the earnings of Burlington Northern are expected to rise by 15% from the previous year. Even after deducting all the taxes, the company is earning a handsome amount of $3 billion. In the third quarter, the net profit of the company was estimated to be $706 million. Burlington Northern is estimated to be a $40 billion to $45 billion Company and Berkshire bought this company at just eleven times the projected profits of 2011.
In the annual letter Buffet talked about its early acquisition and said that they were happy with it. The letter also said that the company didn't expect this much return which is much more than they had thought. The acquisitions have worked in their favor and everything is going well. With this much return, the earnings of the company are expected to increase by 30 % after deducting taxes. The main advantage with the railroad company that is Burlington Northern Santa Fe (BNSF) is that it is much better than trucking. BNSF freight carried a ton over 500 miles on one gallon of diesel. This is three times better than trucking and much more cost efficient. Thus, the operating cost of the company will be less. It also has an advantage that it doesn't create pollution as trucking does, thus it is an eco-friendly freight carrier.
One could see that as time progresses and the movement of goods increases in the US, BNSF will gain the full share in the movement of goods. Thus, we can even conclude that when the traffic or the movement of goods will be done by rail, society will be benefited.
To have a benefit from the railroads, the companies need to invest more, and until now one could see that only Berkshire can invest. Statistics reveal that movement of 42% of freight takes place through rail in the United States, and BNSF accounts 28% of the total share.
