There's no reason to rail on Burlington Northern Santa Fe (NYSE:BNI). It's not the company's fault that business is slow in areas like building and consumer products. In fact, the railroad operator performed admirably during the quarter, despite spotty market conditions.
Freight revenues, which exclude the impact of fuel surcharges, came in 4% higher this time around. The lift was entirely due to pricing improvements -- revenue ton miles (RTMs) came in flat versus last year. Think of RTMs as the number of widgets sold, if BNSF were a widget factory rather than a railway.
Railroad companies are a sabermetrician's dream: Put down those baseball stats and turn your attention to the original iron horse, please. There are tons of operating statistics to slice and dice, but it's up to you to decide which ones are most important to winning the rail game. I recently noted Canadian National's (NYSE:CNI) stellar operating ratio. BNSF's isn't quite in the same league, but the firm did manage a nice improvement in this measure of efficiency over the prior year.
Another efficiency metric to keep an eye on is velocity. This doesn't imply what you might think. Velocity reflects an absence of idle time, rather than Michael Waltrip donning a conductor's cap. Locomotive and car velocity both slipped a bit from last year's strong results. I would assume the hitch was partly due to the mine outages noted in the coal segment, and wouldn't blow the whistle on the firm for this little snag.
All in all, Burlington is a classy Class 1. Larger than both Norfolk Southern (NYSE:NSC) and CSX (NYSE:CSX), BNSF has a dominant foothold in key growth markets like coal and agricultural products (i.e. fertilizer and ethanol). These are exactly the markets that Canadian second fiddle Canadian Pacific (NYSE:CP) is trying to cash in on via its recent Buffett-like buyout. The short-term macro environment may not be ideal for the rails, but it could be worse -- they could be in the trucking biz.
