In the past few weeks, Kansas City Southern (KSU), the smallest Class I railroad in the US, has seen its intermodal traffic slow down. In the week ended March 11, 2017, Kansas City Southern (KSU) reported a YoY (year-over-year) rise of 15% in its overall intermodal traffic. Container volumes increased an almost equal percentage. Plus, trailer traffic rose 17% YoY.
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KSU operates in Mexico through KCSM (Kansas City Southern de México). KSU receives nearly 48% of its revenue from its Mexican operations. In 2016, intermodal accounted for 16% of the company’s total revenue. In Mexico, the company has the sole concession to serve the busy Port of Lázaro Cárdenas.
However, with ongoing talks of constructing a wall on the US-Mexico border, investors should pay attention to how KSU’s business compares with that of other US class I railroads.
Apart from seasonality, intermodal traffic is affected by exclusive access to ports, highway-to-rail conversions, and retail sales. KSU’s US intermodal business competes with major Western carriers such as BNSF Railway (BRK-B) and Union Pacific (UNP). In Mexico, KCSM’s intermodal competes with Landstar System (LSTR), Trinity Logistics, and ByExpress Logistics.
If you want 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 part of RSP’s portfolio holdings.
If you’d like to compare this week’s freight volume data with the previous week’s, check out Market Realist’s Week Ended March 4: Was US Rail Traffic on the Right Track?
Continue to the next part of this series to look at traffic for Canada’s largest freight rail carrier, Canadian National Railway (CNI).