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BNSF’s Intermodal Volumes Swim against the Tide

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BNSF’s intermodal volumes

BNSF Railway’s (BRK-B) total intermodal traffic for the week ended July 23, 2016, rose by 2%. From more than 98,000 containers and trailers in the corresponding week of 2015, the company saw 100,000 containers and trailers in the latest reported week of 2016.

In the same week, container traffic rose by 4.3% on a YoY (year-over-year) basis to more than 90,000, as compared to ~87,000 in the week ended July 25, 2015. However, trailer traffic declined by 15.4% in the week ended July 23, 2016, to ~10,000 trailers from nearly 12,000 trailers in the corresponding week in 2015.

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Why is intermodal important to 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. 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 ~50%. Notably, 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.

BNSF’s intermodal competition

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 with an affiliation for transportation space might consider ETFs like the Wisdom Tree Earnings 500 Fund ETF (EPS). All US-born Class I railroads are included in the portfolio holdings of EPS.

Now let’s examine the details of BNSF Railway’s intermodal traffic.

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