uploads///KSU Intermodal

Kansas City Southern’s Intermodal Volumes Surprise

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Nov. 20 2020, Updated 3:57 p.m. ET

Kansas City Southern’s intermodal volumes

Kansas City Southern (KSU) reported a fall of 3.5% in overall intermodal traffic in the week ended December 17, 2016. Container traffic contracted 3.1% in the reported week.

Much of the fall in volumes was shared by trailers. The trailer traffic shrank 20.3% on a year-over-year basis. The percentage fall in KSU’s intermodal traffic was in contrast with the rise reported by US and Mexican railroads.

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Why is intermodal important to KSU?

KSU operates in Mexico through Kansas City Southern de México (or KCSM). KSU receives nearly 48.0% of its revenue from Mexican operations. In 3Q16, intermodal accounted for 14.7% of the company’s total revenue. In Mexico, the company has the sole concession to serve the Port of Lázaro Cárdenas, a busy port.

Apart from seasonality, intermodal traffic is impacted by exclusive access to ports, highway-to-rail conversions, and levels of 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.

ETF investment

If you want exposure to the transportation sector, you can invest in the Guggenheim S&P 500 Equal Weight ETF (RSP). All the US originated Class I railroads are included in the portfolio holdings of RSP.

In the next part of this series, we’ll look at the traffic for Canada’s largest freight rail, Canadian National Railway (CNI). If you’re interested in comparing this week’s traffic data with the previous week’s, you can refer to Freight Rail Traffic for the Week Ended December 10. For more information on US major railroad stocks, visit Market Realist’s Railroads page.

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