Canadian Pacific versus Canadian National: A Key Intermodal Comparison

Canadian Pacific’s intermodal volumes

Canadian Pacific’s (CP) intermodal volumes also have been on a progressive movement for the past few weeks. In the week ended February 4, 2017, CP reported a 3.6% YoY (year-over-year) jump in overall intermodal traffic. However, there was a 2.5% YoY drop in its international intermodal business, wherein volumes contracted to ~10,600 containers and trailers from ~11,000 containers and trailers one year previously.

However, domestic volumes surged 12% YoY to settle at 8,600 containers and trailers, as compared to 7,700 one year ago. In the week ended February 4, 2017, CP’s intermodal traffic rose, though the percentage gain was just one-half of that reported by close rival Canadian National (CNI).

Canadian Pacific versus Canadian National: A Key Intermodal Comparison

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 moving 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 like J.B. Hunt Transport Services (JBHT), Old Dominion Freight Lines (ODFL), Swift Transportation (SWFT), and XPO Logistics (XPO).

Departures

In this series, we’ve examined the rail traffic data of major US railroads for the week ended February 4, 2017. Notably, ProShares Ultra S&P 500 ETF (SSO) invests ~7.6% in the industrial sector, which includes transportation and logistics.

Investors interested in comparing this week’s freight volume data with the previous week should investigate Market Realist’s Your Freight Rail Traffic for the Week Ended January 28.

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