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Inside Burlington Northern’s Agricultural Products’ 3Q17 Revenues

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BNSF’s Agricultural Products’ revenues

In this section, we’ll assess the 3Q17 performance of Burlington Northern Santa Fe’s (or BNSF) (BRK.B) Agricultural Products segment. In 3Q17, the segment’s freight revenues fell 9.4% to $992 million, from $1.1 billion in 3Q16.

The share of Industrial Products to BNSF’s total operating revenues fell to 18.7% in 3Q17 compared to 21.2% in 3Q16.

Agricultural Products: 3Q17 volumes

In 3Q17, BNSF’s Agricultural Products’ shipments fell 12% on a year-over-year basis. The segment’s carloads fell to 257,000 from 292,000 in 3Q16. However, in the first nine months of 2017, the segment’s freight volumes rose marginally due to increased volumes of domestic grain, ethanol, and other grain products. However, those were negatively offset by reduced shipments of grain exports.

The average revenue per railcar rose 3.2% to $3,861 in the first nine months of 2017, from $3,741 in the corresponding period last year.

Peer group’s 3Q17 agricultural revenues

Strength in the US dollar and plentiful agricultural production in the United States resulted in weak export market conditions. That led to a fall in agricultural freight revenues for BNSF’s peers in the third quarter of 2017. CSX’s (CSX) agricultural carloads fell 4% in 3Q17. BNSF’s arch-rival Union Pacific (UNP) fell 10% for agricultural carloads in the same quarter. Norfolk Southern’s (NSC) agricultural products’ volumes were almost unchanged in 3Q17.

Investors wanting to invest in transportation stocks can consider the Industrial Select Sector SPDR ETF (XLI). All the major US rail companies and airlines (DAL) make up ~9.1% and 12.5%, respectively, of the portfolio holdings of XLI.

Let’s look next at BNSF’s Coal segment in 3Q17.

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