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Norfolk Southern: Chasing Its Intermodal Volumes in Week 13 of 2017

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NSC’s intermodal volumes

Norfolk Southern’s (NSC) total intermodal volumes rose 11.6% in the week ended April 1, 2017. The company’s overall volumes reached over 79,500 containers and trailers. NSC’s container traffic also rose 9.7%. Norfolk Southern’s trailer traffic exhibited a huge percentage rise in the reported week.

NSC’s trailer traffic rose 34.7% YoY (year-over-year) to nearly 7,500 units during the week, compared to 5,600 units in the week ended April 2, 2016. In the first 13 weeks of 2017, Norfolk Southern’s overall intermodal traffic rose 3.2% YoY, indicating a recovery in its volumes. However, these volumes are well behind the robust volumes witnessed by Norfolk Southern in 2014.

If you want to compare this week’s freight volume data with the previous week’s data, please read Market Realist’s Week 12: North American Freight Rail Traffic on the Fast Track.

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Why is intermodal traffic vital for NSC?

NSC’s rise in trailer volumes appears to mark the end of its hardship due to its restructuring of TCS (Triple Crown Services), its underperforming subsidiary. NSC has been shifting shippers to other intermodal lanes. The restructured TCS intends to focus on specific merchandise such as auto parts (TM).

Norfolk Southern expects its truck capacity (JBHT) to tighten during the second half of 2017. It further anticipates that the implementation of fixing the ELDs (electronic logging devices) in trucks should result in service issues, paving a way for railroad intermodal to benefit from the situation.

In addition, the inventory-to-sales levels have declined to their lowest point since 2014, according to Norfolk Southern. This should also give a boost to its intermodal volumes in the coming quarters.

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). FXR’s portfolio holdings include major US airlines and railroad companies.

In the next article, we’ll look at the freight volumes of Norfolk Southern’s primary rival, CSX (CSX).

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