Western Railroad Discussion > BNSF sees headwinds.

http://finance.yahoo.com/news/burlington-northern-santa-fe-BSNF-railroad-investment-industrial-america-150011358.html#

So let's check out this assertion of a "balanced portfolio". Here are percentage break-outs of total carloads (excluding intermodal) for BNSF and UP in 1Q 2015 and 1Q 2016:
               BNSF                 UP
              1Q15   1Q16      1Q15   1Q16
Coal       44%      35%       29%     27%
Oil          11%      13%         4%       5%
Sand        5%        5%       10%       9%
Grain      11%     13%          7%       7%
Chem       8%      10%       17%      19%
Vehic       3%        5%         9%       11%
All other  18%      19%       24%      22%
All other categories < 5% for both roads in both years.

Combining coal, oil and frac sand, in 1Q2015 BNSF was dependent on this stuff for almost 60% of its carloads (down to 53% in 1Q2016). UP was dependent on that stuff for 43% of its carloads in 1Q2015 (down to 41% in 1Q2016). This stuff is going to continue to nose-dive, taking the railroads dependent on it with them.

Grain, chemicals, vehicles, and all other categories provide traffic that will always be there and represent the stuff that makes up a "balanced portfolio". But it was only 40% of BNSF's portfolio in 1Q2015 (47% in 1Q2016), while it was 57% of UP's portfolio in 1Q2015 (59% in 1Q2016).

I would say BNSF has a bigger headwind than UP does.

Best regards,

Rob L.



Edited 1 time(s). Last edit at 05/03/16 15:51 by rob_l.

   The BNSF % down (coal 9%)  equals the % up by the other groups = a push.
   Same with the UP.  Net down 5% for both. Not hardly a disaster there. Seems
   only like a bump in the road.



Edited 2 time(s). Last edit at 05/03/16 16:16 by WJEX.

WJEX Wrote:
-------------------------------------------------------
>    The BNSF % down (coal 9%)  equals the % up
> by the other groups = a push.
>    Same with the UP.  

Of course, % carloads ain't the same as % revenue. You might ask yourself if RRs have the same pricing power in the non-coal, non-oil, non-frac-sand commodities that they have in coal, oil and frac sand.

> Net down 5% for both. Not
> hardly a disaster there. Seems
>    only like a bump in the road.

Not sure what "net down" means here. Comparing 1Q2016 to 1Q2015, BNSF total carloads were down 17.2% while UP total carloads were down 13.6% (again, excluding intermodal).

I agree that it ain't so bad -- yet. The next round of drops in coal, oil and frac sand should make things more interesting. That's when the headwinds will really blow.

Best regards,

Rob L.

Somewhat off subject but related is the 1.000 tankers that BNSF was at one time going to acquire for oil hauling. Were they ever ordered and if so are they in service or parked ? 

The profit margins on coal are still pretty good, but the business is going away.  Intermodal has lower margins, and often originates in competitive ports like Newark, Los Angeles / Long Beach, etc.  Over time, you need to bring your costs and investment in line with the profit profile of the business you're carrying.