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BNSF’s Intermodal Traffic Fell Less Than US Intermodal Traffic

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BNSF’s intermodal volumes

BNSF Railway’s (BRK-B) total intermodal traffic for the week ended April 16, 2016, fell by 4.3% to 96,000 containers and trailers, compared to 100,000 containers and trailers in the corresponding period last year. In the latest reported week of 2016, containers fell by nearly 3% to settle at 86,000 units.

In-line with containers, trailers fell by ~15% in the week ended April 16, 2016, compared to the corresponding week in 2015. BNSF’s total fall in intermodal traffic in the week was less than the fall in total US intermodal traffic.

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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 earned by the company. This business segment accounted for ~31% of BNSF’s total revenue in 2015.

The company’s share of western US rail traffic in 2015 was ~50%. In addition, the company handles one million more intermodal units than any other Class I railroad every year. Intermodal traffic represents nearly 50% of BNSF’s business portfolio by volume.

If we compare intermodal’s share to the revenues of other Class I carriers, clearly Berkshire Hathaway’s gem has the highest share of intermodal business. However, BNSF Railway’s intermodal business faces strong competition from Union Pacific (UNP).

BNSF Railway also faces tough competition from truckers such as J.B. Hunt Transport (JBHT), XPO Logistics (XPO), 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 with an interest in the transportation space can invest in the Wisdom Tree Earnings 500 ETF (EPS). All US-born Class I railroads are included in the portfolio holdings of EPS.

For more information on last week’s rail traffic, visit Market Realist’s Week Ended April 9: North American Rail Traffic, Intermodal Slump. In the next part, we’ll analyze the carload volumes of the smallest US Class I railroad, Kansas City Southern.

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