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Union Pacific: Intermodal Rise Limits Fall in Railcars in Week 36

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UNP’s railcar volumes

Union Pacific (UNP) reported lower freight volumes due to the impact of Hurricane Harvey. In the week ended September 9, 2017, the company posted a 5.9% drop in railcar volumes. Its railcar traffic totaled more than 86,000 units compared with ~92,000 units in the week ended September 10, 2016.

Volumes of carloads excluding coal and coke fell 6.7% to 62,000 railcars in the 36th week of 2017. Union Pacific’s coal and coke carloads also fell 3.7%. The company hauled more than 24,000 coal and coke (ARLP) railcars compared with 25,000-plus railcars in the same week in 2016.

Union Pacific’s southern region is headquartered in Houston, Texas, a major freight rail hub for the company and other US railroads. The recent decline in rail traffic was due to the adverse impact of Hurricane Harvey.

Union Pacific dominates the Western US, competing with Berkshire Hathaway–owned BNSF Railway (BRK-B). In terms of the size of freight volumes, BNSF Railway leads its Class I peers, including UNP.

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UNP’s intermodal traffic

Unlike the fall in railcars reported by Union Pacific, its intermodal volume reported volume gains in the 36th week of 2017. The company’s intermodal units jumped 7.2% in the same week to 66,000-plus containers and trailers compared with 62,000 units in the corresponding week in 2016.

UNP’s container volumes account for more than 95% of its total intermodal traffic. Container traffic rose 7.3% while trailer volumes rose 2.6% in the week ended September 9, 2017.

ETF option

The transportation sector is a cyclical sector, and railroad stocks are up compared with their levels in 2016. If you are optimistic about these stocks, you can consider investing in the iShares US Industrials ETF (IYJ). Major US airlines and railroads make up 4.9% and 6%, respectively, of IYJ’s holdings.

We’ll review BNSF Railway in the next part.

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