BNSF’s 3Q17 revenues

Let’s start this series with an assessment of the 3Q17 revenues for Burlington Northern Santa Fe (or BNSF) (BRK.B). In 3Q17, the company’s overall operating revenues were $5.3 billion compared to $5.2 billion in 3Q16. That resulted in a rise of $147 million, or ~3% YoY (year-over-year).

What Led 3Q17 Revenue Growth for Burlington Northern Santa Fe?

BNSF’s 3Q17 shipments

BNSF’s 3Q17 revenues rose mainly due to an overall 3.1% rise in shipments. In the first nine months of 2017, freight volumes rose 6%. A solid rise in its Consumer Products and Industrial Products segments fueled volume growth in 3Q17. The company’s average revenue per railcar rose 2% to $1,968, from $1,921 in the first nine months of 2017. Increased fuel surcharge revenues from higher fuel prices YoY caused the average revenue per railcar to rise.

It’s worth noting that even though 3Q17 revenues rose, revenue growth fell substantially on a sequential basis. From 15% growth in 2Q17, BNSF’s revenue growth fell to 2.8% in 3Q17. However, so far in 2017, the company’s YoY revenues have risen in all three quarters in contrast to all four quarters last year.

Class I railroads’ 3Q17 revenues

Among BNSF’s Eastern US peers, CSX’s (CSX) revenue growth was marred by a slew of measures to fully implement the Precision Scheduled Railroading technique. Kansas City Southern (KSU) has the strongest revenue growth pipeline among all the Class I peers. The overall top-line growth story for these railroads revolve around volume growth since pricing gains seem elusive. Let’s take a look at the 3Q17 revenue changes for BNSF’s peers.

  • Union Pacific (UNP): rose 5% on 1% volume loss
  • Canadian National Railway (CNI): rose 6.9% on 11% volume gains
  • Canadian Pacific Railway (CP): rose 3% on 18.2% volume gains
  • Kansas City Southern (KSU): rose 9% on 3% volume gains
  • CSX (CSX): rose 1.2% on 1% volume gains

Investors who want exposure to the transportation industry can invest in the iShares Transportation Average (IYT). US-originated rail carriers make up 24.4% of the portfolio holdings of IYT.

Next, let’s take a look at the 3Q17 results for BNSF’s Consumer Products segment.

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