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The US Economy’s Mirror: Rail Traffic for Week Ended November 12

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Part 15
The US Economy’s Mirror: Rail Traffic for Week Ended November 12 PART 15 OF 15

How Canadian Pacific’s Intermodal Volumes Compared with Its Peers

Canadian Pacific’s Intermodal traffic

Canadian Pacific’s (CP) Intermodal segment is continuing its forward momentum, as recorded over the last few quarters. For the week ended November 12, 2016, Canadian Pacific reported a 2.5% rise in overall Intermodal traffic.

A deeper dive into CP’s Intermodal segment data reflects that the Domestic Intermodal volumes rose 6%. However, the International Intermodal traffic fell slightly in the reported week of 2016. CP’s rise in its Intermodal segment’s volumes was in line with the Canadian railroads’ intermodal volumes.

How Canadian Pacific’s Intermodal Volumes Compared with Its Peers

How Canadian Pacific’s Intermodal Volumes Compared with Its Peers

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For a comparison with the previous week’s freight volume data, please read Key Railroads’ Freight Volumes for the Week Ended November 5.

Why is the Intermodal segment important to CP?

The Domestic Intermodal segment formed 12.3% of CP’s revenues and 17.4% of its total volumes in 3Q16. The International Intermodal segment contributed 10.7% of its revenues and 22.3% of its volumes in the same quarter.

Increased truck capacity in CP’s short-haul lane will most likely result in tough competition in the Domestic Intermodal space going ahead. Because the company pulls most of its Domestic Intermodal business from Canada, it will be largely impacted by the growth of Canadian economy.

The company’s International Intermodal business consists of containerized traffic moving between the ports of Vancouver, Montreal, and New York. CP’s International Intermodal growth is tied to the capacity growth at these ports. In addition, the retail demand and the pace of transpacific trade with China influence the International Intermodal volumes of other Class I rail carriers (CNI).

Railroads’ intermodal segments compete with major US trucking companies (XLI) such as J.B. Hunt Transport (JBHT), Old Dominion Freight Line (ODFL), Swift Transportation (SWFT), and XPO Logistics (XPO).

Investors opting for broad-based exposure to the transportation sector can invest in the Guggenheim S&P 500 Equal Weight ETF (RSP). All of the US-originated Class I railroads make up the portfolio holdings of RSP.

For more information on the major US railroad stocks (UNP), please visit Market Realist’s Railroads page.

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