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Why BNSF’s Consumer Products Revenue Slumped in 3Q16

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Dec. 4 2020, Updated 10:53 a.m. ET

BNSF’s Consumer Products revenue slumped

In the previous article, we discussed Burlington Northern Santa Fe’s (BRK-B) 3Q16 revenue and what drove the unfavorable change. Now, let’s dive into BNSF’s Consumer Products freight revenue.

BNSF’s Consumer Products business contributed nearly 35% of its total freight revenue in 3Q16, recording its highest share in total freight revenue. The segment’s freight revenue fell 3.4% in 3Q16 to $1.6 billion, compared to $1.7 billion in 3Q15.

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3Q16 freight volumes

In 3Q16, Consumer Products volumes fell 3.6% on a year-over-year basis. This volume fall was mainly due to lower international intermodal volumes coming from US West Coast ports. In 3Q15, BNSF’s international intermodal volumes were unfavorable owing to soft global economic activity and higher retail stockpiles.

Intermodal volumes include business sectors such as domestic intermodal, international intermodal, and automotive. The domestic intermodal business includes truckloads, intermodal marketing companies, expedited truckloads, LTLs (less-than-truckload), and parcels.

Peers’ revenues

BNSF’s peer group reports intermodal and automotive as separate freight revenue segments. For almost all Class I rail companies, automotive revenue makes up a small portion of total freight revenue. However, this isn’t the case with intermodal volumes. 

Let’s compare BNSF’s peers’ intermodal revenues in 3Q16 to get a clear idea of the scale of BNSF’s operations compared to those of its peers, especially compared to Union Pacific (UNP), its biggest competitor:

  • UNP — fell 9%
  • Canadian Pacific (CP) — rose 1.2%
  • CSX Corporation (CSX) — fell 6%
  • Kansas City Southern (KSU) — fell 7%

All the US rail companies mentioned above except Canadian National (CNI) and CP are included in the portfolio holdings of the iShares US Industrials ETF (IYJ). This ETF holds 5.4% in railroads and 4.9% in major US airlines.

In the next article, we’ll review BNSF’s Industrial segment’s freight revenue in 3Q16.

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