uploads///BNSF Intermodal

BNSF Railway: How Much Did Intermodal Volume Fall Last Week?

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Apr. 12 2016, Updated 4:05 p.m. ET

BNSF’s intermodal volumes

BNSF Railway’s (BRK-B) total intermodal traffic for the week ending March 26, 2016, fell by around 16% to 84,000 units compared to 99,000 units in the corresponding week in 2015. In the latest reported week of 2016, container units declined by 15% to 74,000 against ~87,000 units in the week ending March 28, 2015.

Trailer units fell by 22% for the week ending March 26, 2016, as compared to the corresponding week in 2015. BNSF’s intermodal fall in the week ending March 26, 2016, was on par with the fall in overall US intermodal traffic. This is highly noteworthy given its dominance in the overall US intermodal space.

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Why does intermodal traffic 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. Note that 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 49.8%.

In addition, the company handles 1 million more intermodal units every year than any other Class I railroad company. Intermodal represents nearly 50% of BNSF Railway’s business portfolio by volume. BNSF Railway is the only railway to offer direct service between the West Coast and Atlanta.

Berkshire Hathaway’s gem BNSF Railway has the highest share of intermodal of its total revenues compared to other Class I railway companies. However, BNSF Railway’s intermodal traffic faces strong competition from Union Pacific (UNP). BNSF Railway also faces tough competition from truckers like J.B. Hunt Transport Services (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 a carrier’s exclusive access to certain high-traffic ports.

Investors interested in diversified exposure to the transportation sector can invest in the VanEck Vectors Morningstar Wide Moat ETF (MOAT). Major US railroads make up 10.8% of MOAT’s holdings.

In the next part of this series, we’ll analyze the carload volumes of the smallest US Class I railroad, Kansas City Southern.

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