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BNSF’s Intermodal Volumes versus Industry Volumes

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BNSF’s intermodal volumes

BNSF Railway’s (BRK-B) total intermodal traffic for the week ending September 10, 2016, fell 3.3% YoY (year-over-year) to ~99,000 containers and trailers, down from nearly 104,000 last year. Container traffic fell 2.8% YoY to ~76,000 containers from ~78,000 units last year.

Trailer traffic fell 7.2% YoY in the week ending September 10, 2016, to ~9,000 trailers, down from ~10,000 trailers. The fall in BNSF’s intermodal volumes was in tune with the decline reported by US railroads for the same week.

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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. Notably,  this business segment accounted for ~31% of BNSF’s total revenues in 2015.

The company’s share of rail traffic in the Western US in 2015 was ~50%. The company also handles one million more intermodal units per year than any other Class I railroad, and 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. Remember, intermodal volumes are affected not just by seasonality but by highway-to-rail conversions and the carrier’s exclusive access to certain high traffic ports.

Investors interested in the transportation space can consider investing in ETFs like the Wisdom Tree Earnings 500 Fund ETF (EPS). All US-originating Class I railroads are included in the portfolio holdings of EPS.

In the next part, we’ll go through the carloads of the smallest US Class I railroad, Kansas City Southern (KSU).

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