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U.S.-based major railroads’ profit growth surged back in the third quarter, as resilient pricing and increased operational efficiencies overcame a 2.8 percent drop in total volume hauled compared to the same period last year.

Total profit at the five Class I railroads — BNSF Railway, CSX Transportation, Kansas City Southern Railway, Norfolk Southern Railway and Union Pacific Railroad — increased 9.5 percent year-over-year to $3.2 billion. Revenue in the period grew 4.9 percent to $17.7 billion. The five carriers saw profit growth slow dramatically in the second quarter to 1.5 percent, after a 10.8 percent jump in the first quarter.

The two major Canadian railroads experienced a slowdown in profit growth in the third quarter — but only because Canadian Pacific had such an exceptional second quarter. Total profit at CP and Canadian National increased 15.8 percent to $900 million, after rising 32 percent in the previous quarter. The U.S. domestic energy boom more than offset the volume the U.S. Class I rails have lost through declining coal traffic.

“As we move through the rest of the year, we’re mindful of the economic uncertainty in the marketplace,” Robert Knight, UP’s chief financial officer, said during an
Oct. 13 earnings call. “For the fourth quarter, we expect to see modest volume growth, mainly driven by improved grain shipments. Assuming the economy doesn’t slow down for the rest of the year, we would also expect to see continued growth in other market sectors.”

One sector UP didn’t see traffic growth was in its intermodal business. Intermodal volume slipped 1 percent year-over-year to about 848,000 units. This was a result of the railroad choosing pricing gains over volume growth, John Larkin, managing director and head of transportation capital research at Stifel Nicolaus, said in a research note.

KCS, because of its surging U.S.-Mexico business, grew intermodal volume at the fastest pace, 5.8 percent, of the U.S. Class I railroads. The smallest Class I carrier estimates it’s capturing only 3 percent of the annual 3 million cross-border trucking moves that fall into its network reach.

Among the U.S carriers with the most robust intermodal gains, CSX fell closely behind, with a 5.6 percent increase in the quarter. International traffic rose 3 percent and domestic volume jumped 7 percent, to a quarterly CSX record. BNSF increased its intermodal business 5.4 percent year-over-year in the quarter.

CSX and BNSF have been two of the most aggressive railroads in using Internet marketing to explain the benefits of intermodal to shippers. CSX in October launched a Web site — www.intermodal.com — for its intermodal business, which allows shippers to optimize how much they could save by shifting loads from highway to rails.

CSX has been “going out to the beneficial cargo owners, along with our channel of sales partners and introducing to people who are not traditional users of the intermodal product, or were fairly light users of the intermodal product, what intermodal is, what its capabilities are, and what the service product that our operating team is delivering for us. Those combinations together have proved to be very successful for us,” said Clarence Gooden, chief commercial officer at the Jacksonville, Fla.-based railroad.

BNSF this year launched domestic and international intermodal apps that help shippers determine whether the railroad’s network would work for them. Both apps also provide testimonies from shippers, including fast food restaurant chain Jack in the Box and brewer Sierra Nevada, on how they were able to maximize BNSF’s network.

“What it does from a high level is help (users see) if we are in the ballpark on service and in the ballpark on rates,” Katie Farmer, BNSF’s group vice president of consumer products, said in July.

NS is reaping intermodal volume gains through the hundreds of millions of dollars the railroad has spent on its Heartland and Crescent corridors. Traffic on the Heartland Corridor, a 2,500-mile network connecting the mid-Atlantic and Gulf Coast, jumped 19 percent in the third quarter. The Crescent Corridor enjoyed a 7 percent gain in the same period, NS told investors on Oct. 23.  The Heartland Corridor traffic jump was “unusual,” but “a suite of services to and from the Port of Virginia” will continue to drive “robust growth,” Donald Seale, executive vice president at Norfolk Southern Railway, said during an Oct. 23 earnings call.

Contact Mark Szakonyi at mszakonyi@joc.com and follow him at twitter.com/szakonyi_joc.