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US Freight Traffic Takes the High Rail: Week Ended February 25

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Part 15
US Freight Traffic Takes the High Rail: Week Ended February 25 PART 15 OF 15

Behind Canadian Pacific’s Intermodal Traffic

Canadian Pacific’s intermodal traffic

Canadian Pacific’s (CP) intermodal volumes have been on a progressive move for the past few weeks. However, in the week ended February 25, 2017, CP reported a fall of 3.9% in overall intermodal traffic. Domestic containers and trailers traffic fell 2.2% to about 8,000 units.

There was also a 5.1% YoY (year-over-year) drop in CP’s international intermodal business, wherein volumes contracted to ~10,000 containers and trailers from ~11,000 one year previously.

Behind Canadian Pacific&#8217;s Intermodal Traffic

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In the week ended February 25, 2017, CP’s intermodal traffic rose, though the percentage gain was minuscule compared with what close rival Canadian National (CNI) reported.

Why intermodal matters for CP

Increased truck capacity in CP’s short-haul lane will most likely result in tough competition in the domestic intermodal space going forward. Since the company gets most of its domestic intermodal business from Canada, it will be heavily affected by growth in the Canadian economy.

The company’s international intermodal business consists of containerized traffic between the ports of Vancouver, Montreal, and New York. CP’s international intermodal growth is tied to capacity growth at these ports. Retail demand and the pace of transpacific trade with China also have a bearing on international intermodal volumes of other Class I rail carriers (XLI).

The intermodal segments of railroads mainly compete with major US trucking companies such as J.B. Hunt Transport Services (JBHT), Old Dominion Freight Lines (ODFL), Swift Transportation (SWFT), and XPO Logistics (XPO).

Investments

The ProShares Ultra S&P 500 ETF (SSO) invests ~7.6% in the industrial sector, which includes transportation and logistics. If you want to compare this week’s freight volume data with the previous week’s, check out Market Realist’s Tracking Rail Traffic for the Week Ended February 18.

Departures

In this series, we’ve examined the rail traffic data of major US railroads for the eighth week of 2017, or the week ended February 25, 2017.

For ongoing updates on major US railroad stocks, keep checking in with Market Realist’s Railroads page.

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