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Norfolk Southern: Trailers Rise by Double Digits in Week 15

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Norfolk Southern’s intermodal volumes

Norfolk Southern’s (NSC) total intermodal traffic rose 6.5% in the week ended April 15, 2017. Its volumes reached more than 69,500 containers. NSC’s container traffic rose 5.6%, although trailers witnessed a huge surge in traffic.

NSC’s trailer traffic rose 16.0% YoY (year-over-year) to nearly 6,900 units in the week compared to 5,900 units in the week ended April 16, 2016. Since the beginning of 2017, Norfolk Southern’s overall intermodal traffic has risen 3.2% YoY compared to US railroad companies overall.

If you want to compare this week’s freight volume data with the previous week’s data, check out Market Realist’s Week 14: US Freight Rail Volumes on a Growth Trajectory.

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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 aims 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 also anticipates that the implementation of fixing the ELDs (electronic logging devices) in trucks should result in service issues, paving the way for railroad intermodal to benefit from the situation.

In addition, the inventory-to-sales level has fallen to the lowest point since 2014, according to Norfolk Southern. That should boost 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 part, we’ll look at the freight volumes of Norfolk Southern’s primary rival, CSX (CSX).

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