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How Did Burlington Northern Santa Fe Perform in 2Q17?

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Part 5
How Did Burlington Northern Santa Fe Perform in 2Q17? PART 5 OF 7

Burlington Northern Santa Fe’s Agricultural Products Revenues

BNSF’s Agricultural Products revenues

In this part of the series, we’ll review Burlington Northern Santa Fe’s (or BNSF) (BRK.B) Agricultural Products revenues in 2Q17. That quarter, the company’s Agricultural Products’ freight revenues rose 18.0% to $1.1 billion compared to $910.0 million in the corresponding quarter of 2016.

The segmental share in BNSF’s overall revenues rose to 20.5% in 2Q17 from 19.8% in the same quarter last year.

Burlington Northern Santa Fe&#8217;s Agricultural Products Revenues

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Volumes in 2Q17

In the second quarter of 2017, BNSF’s agricultural products volumes expanded 14.5% on a year-over-year basis. Its carloads increased to 285,000 from 249,000 railcars in 2Q16. The segmental shipments increased mainly due to higher soybean and corn shipments.

Increased grain exports (ADM) overall also fueled the rise in agricultural products shipments. The average revenue per car rose 3.3% to $3,862 in the first half of 2017 from $3,737 in the corresponding period last year.

Grain outlook in 2017

The USDA (U.S. Department of Agriculture) foresees a reduction in projected 2017–2018 wheat supplies and production. It estimates lower rice supplies and lower production in 2017–2018. However, it anticipates higher production of oilseeds in the same period with higher estimated production for soybeans, canola, and peanuts. The agency raised its forecast for red meat and poultry production in 2017.

Peer group’s 2Q17 agriculture revenues

A strong US dollar along with higher grain production outside the United States and Canada negatively impacted the recent grain volumes for Class I railroads (UNP) (NSC). However, things are changing due to increased consumption and a solid Canadian crop. Let’s compare the agricultural revenues of BNSF’s peers in 2Q17:

  • Union Pacific’s (UNP) agricultural products’ revenues rose 7.0%.
  • CSX’s (CSX) agricultural and food products’ revenues rose 5.0%.
  • Kansas City Southern’s (KSU) grain and food products’ revenues rose 7.4%.
  • Canadian Pacific Railway’s (CP) grain revenues rose 20.0%.

If you want to indirectly invest in transportation companies, you can invest in the Industrial Select Sector SPDR ETF (XLI). All the major US rail companies and airlines make up ~9.1% and 12.5%, respectively, of the portfolio holdings of XLI.

Let’s look next at BNSF’s operating margins in 2Q17.

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