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

PART:
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Part 7
The US Economy’s Mirror: Rail Traffic for Week Ended November 12 PART 7 OF 15

How Union Pacific’s Intermodal Volumes Compared with the Industry

Union Pacific’s intermodal volumes

In the week ended November 12, 2016, Union Pacific’s (UNP) overall intermodal traffic fell 5.4% on a year-over-year basis. The trailers claimed a higher share in the decline. Its units fell 14.3%, and the container volumes fell 4.9% in the reported week of 2016.

In the week ended November 12, 2016, UNP moved 70,000 containers compared with more than 73,000 in the week ended November 14, 2015. UNP’s fall in intermodal volumes by percentage was much higher compared with the 1.4% decline reported by US railroads. Investors interested in UNP’s 3Q16 results can read Union Pacific’s 3Q16 Earnings Show a Topsy-Turvy Ride Ahead.

How Union Pacific&#8217;s Intermodal Volumes Compared with the Industry

How Union Pacific&#8217;s Intermodal Volumes Compared with the Industry

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Why is intermodal important to UNP?

For all Class I railroads, including Union Pacific, intermodal growth assumed significance after the headwinds related to coal made its transportation unattractive. In 3Q16, UNP’s intermodal volumes accounted for 38% of total volumes, while intermodal revenues contributed nearly 20%.

The company’s intermodal volumes are specifically impacted by the pace of transpacific trade in the Chinese market. The other factors include retail stockpiles and retail demand. Higher stockpiles and lower demand negatively impacts all railroads’ intermodal traffic.

In addition, the collapse of South Korea shipping company Hanjin has affected the intermodal business of major US Class I railroads. This is mainly due to the denial of service by major ports worldwide. These ports feared that if they accepted the Hanjin ships, they wouldn’t be paid due to the financial condition of this South Korean shipping giant.

Usually, railroads’ intermodal segments would compete with long-haul trucking companies such as J.B. Hunt (JBHT), Swift Transportation (SWFT), Knight Transportation (KNX), and XPO Logistics (XPO).

Investors interested in the transportation sector can invest in the iShares US Industrials ETF (IYJ). All major US railroads make up 5.6% of the portfolio holdings of this ETF.

For a comparison with the previous week’s freight volume data, please read Market Realist’s Key Railroads’ Freight Volumes for the Week Ended November 5. More information on the major US railroad stocks can be obtained on Market Realist’s Railroads page.

In the next part of this series, we’ll look at UNP’s rival BNSF Railway’s (BRK-B) rail traffic.

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