Lower Volumes Take a Toll on BNSF’s 1Q16 Revenues
How Did Burlington Northern Santa Fe Perform in 1Q16?
BNSF’s 1Q16 revenues
As discussed in the last part, Burlington Northern Santa Fe (BRK-B) receives its revenues from four segments. The company’s 1Q16 consolidated revenues were $4.7 billion against $5.6 billion in the corresponding quarter last year. This represents a year-over-year fall of $835.0 million or 15%.
Overall volumes and average revenue per car
The major reasons behind the drop in revenues were the overall decline in volumes. The continued fall in demand for coal and some industrial products led to the decrease in volumes in 1Q16. Overall volumes in the reported quarter went down by 5.5% to 2.3 million carloads from 2.5 million carloads in 1Q15. BSNF’s average revenue per car declined by 10.4% to $1,952 from $2,179. Lower fuel surcharge revenues resulting from reduced fuel prices and changes in business mix resulted from lower average revenue per car.
The above graph shows that the current quarter revenues mark the steepest fall of ~15% in the last nine quarters. Beginning in 4Q14, we can observe a systematic downfall in the year-over-year revenues. A quick glance at the financials reveals that the revenues were largely impacted by a decline in intermodal and energy-related commodities volumes.
Peer group revenue change
The current commodities environment and strong US dollar have negatively impacted the overall volumes and revenues of almost all the Class I railroads.
Kansas City Southern’s (KSU) revenue fell 7%. Eastern operator CSX (CSX) also reported a fall of 13.5% in revenue on a year-over-year basis. CSX’s competitor Norfolk Southern’s (NSC) revenue fell 5.7% during the same period. Genesee and Wyoming’s (GWR) revenues rose 21.6% mainly due to the impact of the Freightliner acquisition in March 2015. Canadian National Railway’s (CNI) revenues declined by 4%. Its rival Canadian Pacific Railway (CP) reported a 5% decline in revenues in the first quarter of 2016.
Investors who want exposure to the transportation and logistics sector can invest in the iShares Transportation Average ETF (IYT). Major US originated railroads make up 23.5% of the portfolio holdings of IYT.
In the coming part, we’ll go through BNSF’s consumer products segment.
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