BNSF Railway’s Intermodal Volumes Matter

In the eighth week of 2017, BNSF Railway’s (BRK-B) overall intermodal traffic rose slightly by 0.8% on a YoY (year-over-year) basis to ~100,000 containers and trailers, up from ~99,000 containers in the same week of 2016. The container volume rose 1.3% to more than 90,000 containers.

Meanwhile, trailer volumes fell 3.9% YoY (year-over-year) to ~10,000 trailers. BNSF’s percentage rise in intermodal traffic came in contrast with the rise reported by US railroads.

BNSF Railway’s domestic and international intermodal operations are part of its Consumer Products Freight business. The business also includes automotive freight. It’s worth noting that this segment accounted for ~31% of BNSF’s total revenue in 2015.

The company’s share of Western US rail traffic in 2015 was ~50%. Notably, BNSF handles a million more intermodal units every year than any other Class I railroad, and intermodal represents nearly 50% of BNSF’s business portfolio by volume.

BNSF Railway faces tough competition from truckers such as J.B. Hunt Transport Services (JBHT) and Swift Transportation (SWFT) in the intermodal space. Remember, intermodal volumes are impacted by seasonality, highway-to-rail conversions, and access to certain high-traffic ports.

If you’re interested in the transportation space, you may want to invest in the Wisdom Tree Earnings 500 ETF (EPS). All US-born Class I railroads are included in its portfolio. Investors interested in comparing this week’s freight volume data with the previous week’s should check out Market Realist’s Tracking Rail Traffic for the Week Ended February 18.

In the next part, we’ll take a look at the carloads of the smallest US Class I railroad, Kansas City Southern (KSU).