Interpreting Canadian National’s Intermodal Volumes
Canadian National’s intermodal volumes
In the week ended January 7, 2017, Canadian National Railway’s (CNI) overall intermodal volumes fell 11.2%. The fall in container volumes was almost equal to the overall volume fall that same week. Notably, trailer movement remained flat.
The company moved ~37,000 containers in the first week of 2017, as compared to ~42,000 containers in the corresponding week of 2016. The percentage fall in CNI’s intermodal volumes came in contrast with the rise reported by Canadian railroads, though it was in line with the fall recorded by US railroads.
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Why is intermodal important for CNI?
Canadian National’s Intermodal segment contributed 26.0% of its revenues in 3Q16. Of its total carloads in that quarter, intermodal’s share was 41.8%. Canadian National also operates one of the largest trucking services in Canada, which supplements its intermodal business.
Canadian National’s competitive advantage comes from its sole access to the Port of Prince Rupert, British Columbia. CNI also connects in a long arc from Vancouver, British Columbia, and Prince Rupert, which provides opportunities for the company to move containers from Asia to the North American heartland.
CNI’s Domestic segment is driven by consumer markets and by US and Canadian economic growth. Its International segment is influenced by North American economic and trade conditions. In intermodal, in general, the company faces competition from truckload companies like J.B. Hunt Transport Services (JBHT), Swift Transportation (SWFT), and Landstar System (LSTR).
If you’re looking for exposure to the transportation sector, you can invest in the Guggenheim S&P 500 Equal Weight ETF (RSP). All US-originated Class I railroads are included in the portfolio holdings of RSP.
In the next part, we’ll take a look at CNI’s rival, Canadian Pacific Railway (CP), and its weekly rail traffic data.