Norfolk Southern’s Intermodal Volumes
Norfolk Southern’s (NSC) total intermodal traffic fell 13.4% in the week ended January 7, 2017. Volumes in the reported week reached ~60,000 containers and trailers, as compared to ~70,000 in the first week of 2016. NSC’s container traffic fell 13.8% from ~54,000 units in the week ended January 9, 2016, to more than 54,000 units in the first week of 2017.
Investors interested in comparing this week’s freight volume data with the previous week can do so at US Freight Rail Traffic Closed 52nd Week on a Positive Note.
In the first week of 2017, NSC’s trailer traffic fell 9.2% from ~7,000 units in the week ended January 9, 2016, to ~6,000-units. On a comparative basis, this decline in NSC’s intermodal volumes was almost equal to the drop reported by US railroads overall.
Why is intermodal traffic so important?
NSC’s rise in trailer volumes appears to mark the end the hardship due to the restructuring of TCS (Triple Crown Services), an underperforming subsidiary. NSC has been shifting shippers to other intermodal lanes. The restructured TCS intends to focus on specific merchandise like auto parts (TM).
The company reported reduced volumes of higher-rated Triple Crown freight in 3Q16, which resulted in lower intermodal revenues per unit for the company.
Notably, the intermodal businesses of all major US railroads face strong competition from the trucking industry (JBHT). Although railroads are four times more fuel efficient than trucks, the fall in fuel prices in 2016 has made truckers more competitive.
But with fuel prices on the rise again, intermodal volumes should rise in coming quarters. This rise would be due to the cost-efficient nature of railroads on medium and long hauls, wherein trucking would be less lucrative.
Investing in ETFs
Railroads make up part of the industrial sector. If you want exposure to the transportation and logistics sector, you can invest in the First Trust Industrials/Producer Durables AlphaDEX ETF (FXR). Major US airlines and railroads are part of the portfolio holdings of FXR.
In the next part, we’ll look at the rail traffic of Norfolk Southern’s competitor, CSX (CSX).