No Credit Upgrade For Warren Buffett’s BNSF Rail Outfit (BRK-B)

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Berkshire Hathaway Inc. (NYSE: BRK-B) may have been hoping that a review of the credit ratings of its Burlington Northern Santa Fe railroad unit would be given a credit upgrade.  That is not the case, but it is not exactly bad news either.

Standard & Poor’s has affirmed BNSF’s credit ratings at BBB+, which maintains its investment grade by far.  The outlook is considered ‘stable’ and that implies no downgrade fears in the near future.

S&P noted that BNSF’s earnings and cash flow continue to improve due to core pricing gains and increased operating efficiencies.  The stable rating is also based upon earnings growth of the rail unit.

The part that sounded a bit cautious in the report was that S&P sees rising capital spending projects and it also sees Berkshire Hathaway Inc. taking ongoing dividends out of the BNSF unit.

S&P noted, “We expect better pricing, rising volumes, and improved operating efficiency to continue to strengthen the company’s revenues and earnings over the next few quarters.”  BNSF’s short-term ratings were withdrawn because the rail unit no longer issues commercial paper and it terminated its revolving credit facility.

JON C. OGG

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