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BNSF’s intermodal volumes
BNSF Railway’s (BRK-B) total intermodal traffic for the week ended April 2, 2016, was down by 2.2% to 94,000 compared with 96,000 units in the corresponding period in 2015. In the latest reported week of 2016, the containers reversed a few weeks of falling trends and rose just slightly to settle at 84,000 units.
However, trailers went down by 20% for the week ended April 2, 2016, against the corresponding week in 2015. BNSF’s intermodal fall in the latest reported week of 2016 was half the fall in total US intermodal traffic.
Why intermodal matters for BNSF
BNSF Railway’s domestic and international intermodal operations are part of the consumer products freight business. This business also includes automotive freight the company earns. Investors should note that this business segment accounted for ~31% of BNSF’s total revenues in 2015. The company’s share of Western US rail traffic in 2015 was 49.8%.
In addition, the company handles one million more intermodal units every year than any other Class I railroad. Intermodal represents nearly 50% of BNSF’s business portfolio by volume. It is the only railway to offer direct service between the West Coast and Atlanta.
If we compare intermodal’s share to revenues with other Class I carriers, then clearly this Berkshire Hathaway gem has the highest share of intermodal in its total revenues. However, BNSF Railway’s intermodal faces strong competition from Union Pacific (UNP). BNSF Railway also faces tough competition from truckers like J.B. Hunt Transport (JBHT) and Swift Transportation (SWFT) in the intermodal space.
We should note that intermodal volumes, apart from seasonality, are also affected by highway-to-rail conversions and the carrier’s exclusive access to certain high traffic ports.
Investors who want exposure to the transportation space can invest in the Wisdom Tree Earnings 500 Fund ETF (EPS). US Class I railroads make up 0.94% of the ETF. For more information on the previous week’s rail traffic , visit Market Realist’s North American Railroads as of March 26: Slipping off the Tracks.
In the next part, we will analyze the carload volumes of the smallest US Class I railroad, Kansas City Southern.
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