BNSF’s Intermodal Didn’t Fall as Much as Other Railroads’ Traffic
North American Rail Traffic Saw Double-Digit Slump
BNSF’s intermodal volumes
BNSF Railway’s (BRK-B) total intermodal traffic for the week ended May 7, 2016, was down by 3.6%. From 100,000 containers and trailers in the comparable week of 2015, the company’s intermodal traffic fell to 96,000 containers and trailers in the reported week of 2016. In the same week, container traffic slowed down by 2% on a year-over-year basis.
In line with containers, the trailers declined by ~15% for the week ended May 7, 2016, against the corresponding week in 2015. In the same week, the fall in BNSF’s total intermodal traffic was 50% less than the fall in total US intermodal traffic. The fall was much less compared to prime competitor Union Pacific’s (UNP) decline in intermodal traffic.
Why does intermodal matter for BNSF?
BNSF Railway’s domestic and international intermodal operations are part of the consumer products freight business. This business also includes automotive freight earned by the company. This business segment accounted for ~31% of BNSF’s total revenues in 2015. The company’s share of the Western US rail traffic in 2015 was ~50%. 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.
If we compare intermodal’s share to revenues with other Class I carriers, then BNSF Railway’s intermodal accounts for the largest share of total revenues. This major Western carrier’s intermodal segment faces strong competition from Union Pacific (UNP), another dominant railroad in that region. 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.
The transportation and logistics sector forms part of the industrial sector. The ProShares Ultra S&P 500 ETF (SSO) invests ~7.6% of its holdings in the industrial sector.
For more information on the previous week’s rail traffic, visit Market Realist’s Week Ended April 30: North American Rail Traffic Falls, Mexico Up.
In the next part, we’ll analyze the carload volumes of the smallest US Class I railroad, Kansas City Southern.
Browse this series on Market Realist: