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CP’s Intermodal: Domestic Volumes Up, International Volumes Down

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Nov. 20 2020, Updated 11:27 a.m. ET

Canadian Pacific’s intermodal traffic

For the week ended April 23, 2016, Canadian Pacific (CP) reported a slight rise in domestic volumes at 8,500 units from 8,400 units on a year-over-year basis. However, the international intermodal volumes were down by 4% at 10,500 units in the same week in 2016. In the reported week, CP’s total intermodal traffic was down by just 2%, compared with a 6.3% and 2.3% fall in total US and Canadian intermodal traffic, respectively.

Canadian Pacific (CP), unlike other Class I railroads, doesn’t report intermodal traffic in the same format. Rather, it segregates the intermodal volumes into domestic and international segments. Generally, intermodal volumes are measured by number of containers and trailers hauled.

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Why is intermodal important to CP?

Domestic intermodal formed 11.2% of the company’s revenues and 15.8% of total volumes in 2015. International intermodal contributed ~9% of revenues and 21.3% of volumes in the same year. Increased truck capacity in CP’s short haul lane will most likely result in tough competition in the domestic intermodal space going ahead. Since the company squeezes most of the domestic intermodal business from Canada, it will be largely impacted by the growth of the 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 can affect the international intermodal volumes of other Class I rail carriers.

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

All the US-born Class I railroads make up the portfolio holdings of the WisdomTree Earnings 500 Fund ETF (EPS).

For information on the previous week’s rail traffic, visit Market Realist’s Week Ended April 16: US, Canadian Railcars and Intermodals Slumped.

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