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Growth for Burlington Northern Santa Fe’s Consumer Products

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BNSF’s Consumer Products revenues in 2Q17

We’ve already looked at Burlington Northern Santa Fe’s (or BNSF) (BRK.B) 2Q17 revenues. Now we’ll look at its Consumer Products segment’s freight revenues, which rose to $1.7 billion in 2Q17. That’s an 8.4% rise from $1.6 billion in the same quarter last year.

The Consumer Products segment remains the largest contributor to BNSF’s overall freight revenues. In 2Q17, the segment’s share was 33.2% compared to 35.0% in the corresponding quarter in 2016.

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Consumer Products’ freight volumes in 2Q17

In 2Q17, BNSF’s Consumer Products segment’s volumes rose 5.8% on a year-over-year basis. Shipments grew primarily due to an increase in domestic and international intermodal and automotive freight. The volume rise was due to a higher market share, lower retail stockpiles, and better economic conditions in the United States. The average revenue per share for the segment rose 2.7% in 2Q17.

BNSF’s Consumer Products segment includes domestic and international intermodal and automotive freight. Domestic intermodal includes truckload, intermodal marketing companies, expedited truckload, LTL (less-than-truckload), and parcel.

Peers’ segmental revenue growth

Unlike BNSF, the other Class I railroads report intermodal freight and automotive freight as separate verticals. The intermodal business of any railroad is affected by highway-to-rail conversions, the level of retail inventory, and containers and trailer traffic at the serving ports.

Let’s compare BNSF’s peer group’s intermodal revenue growth in the second quarter of 2017. With this, you’ll be able to evaluate the intermodal operations of these railroads.

  • Union Pacific (UNP): rose 3.0%
  • Canadian National Railway (CNI): rose 17.0%
  • Canadian Pacific Railway (CP): rose 8.0%
  • CSX (CSX): rose 7.0%
  • Norfolk Southern (NSC): rose 10.2%
  • Kansas City Southern (KSU): fell 1.0%

Except for the Canadian freight railroads above, all the Class I railroads are included in the portfolio holdings of the iShares US Industrials (IYJ). IYJ holds 5.6% in railroads and 4.6% in US airlines.

In the next part of this series, we’ll look at BNSF’s Industrial Products segment.

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