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Analyzing BNSF’s Second-Quarter Revenue Trend

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Second-quarter revenues

Berkshire Hathaway’s (BRK.B) BNSF (Burlington Northern Santa Fe) railroad operations are reported in four segments—Industrial Products, Consumer Products, Agricultural Products, and Coal. In the second quarter, BNSF’s total revenues were $5.8 billion—up 12% YoY (year-over-year) from $5.2 billion in the second quarter of 2017. Excluding non-rail logistics and accessorial revenues of $324.0 million, BNSF’s total freight revenues were $5.5 billion—up 11.1% YoY from $5.0 billion in the second quarter of 2017.

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Volumes

The rise in BNSF’s second-quarter revenues was primarily due to 5.3% volume growth. The volumes were 2.6 million units in the quarter—compared to 2.5 million in the same period last year. The average revenue per car expanded 4% due to increased fuel surcharge revenues, pricing gains, and changes in the business mix. The average revenue per car was $2,063 in the first six months of 2018—compared to $1,991 in the same period last year.

Looking at the above graph, in the past four quarters, BNSF’s revenue growth has increased sequentially. The railroad’s revenues rose sharply from the second quarter of 2016 until the second quarter of 2017. The revenues declined in the third quarter of 2017 and increased later.

Peers’ second-quarter revenue growth

In 2018, the overall volume growth for major US railroads drove a sharp rise in intermodal traffic. The increased traffic helped the railroads’ second-quarter revenue growth. Higher fuel prices YoY contributed to the railroads’ top-line growth in the second quarter. Let’s review the second-quarter revenue change for BNSF’s peers.

  • Union Pacific (UNP) rose up 8% on 4% volume gains.
  • Kansas City Southern (KSU) rose 4% on a 1% shipment rise.
  • CSX (CSX) rose 6% on 2% volume gains.
  • Norfolk Southern (NSC) rose 10% on a 6% shipment rise.

Investors who are bullish on transportation and logistics sector stocks could consider investing in the iShares Transportation Average (IYT). IYT holds 28.3% in major US railroad companies.

Next, we’ll discuss how BNSF’s Consumer Products segment performed.

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