CNR’s 4Q17 intermodal revenues

In this article, we’ll look at Canadian National Railway’s (CNI) 4Q17 intermodal vertical performance. The segment’s share of CNI’s total operating revenue was 26.4% in that quarter compared with 23.8% in the fourth quarter of 2016. In 4Q17, the railroad reported intermodal revenue of 816.0 million Canadian dollars, up 13% from 720.0 million Canadian dollars a year before.

What Was behind CNI’s Intermodal Revenue Growth in 4Q17?

CNI’s intermodal volumes in 4Q17

In the fourth quarter of 2017, CNI’s intermodal RTM (revenue ton miles) jumped 15% to 15,127 million from 13,194 million in 4Q16. Rail freight revenue per RTM in the intermodal division contracted 1% in the reported quarter. The company reported a sharp 20% rise in intermodal volumes expressed in containers and trailers to 647,000 units from 541,000 in the fourth quarter of 2016.

CNI’s prime competitor, Canadian Pacific Railway (CP) witnessed 6% growth in intermodal volumes in 4Q17 against the 20% expansion reported by the former. The Montreal-headquartered company’s international container revenue zoomed 22% driven by import demand.

Management outlook

Canadian National Railway expects solid growth in the British Columbia North corridor in 2018 for the coal as well as intermodal business. The company has plans to invest heavily in intermodal terminals. On the international intermodal side, CNI anticipates robust container trade in North America. 2018 will test the increased capacity limit of the Port of Prince Rupert. The expansion of Deltaport terminal should also drive the company’s intermodal revenue in 2H18.

On the domestic intermodal front, steady demand from Midwest and Canadian customers is expected to boost volumes. In 3Q17, Canadian National Railway invested in Toronto network to facilitate the handling of large volumes at its Brampton intermodal terminal in Ontario. The company is aiming for a 15% terminal capacity expansion in the Brampton terminal. This should spur growth for CNI’s domestic intermodal business.

Peer group’s intermodal revenue in 4Q17

Overall, the international intermodal business looks healthy for the US Class I railroads (IYT) in 2018. The domestic intermodal is still seeing stiff competition from trucking and reduced highway-to-rail conversions. The intermodal revenue changes for major railroads in 4Q17 were as follows:

  • Canadian Pacific Railway’s revenue rose 7% to $361.0 million.
  • CSX’s (CSX) revenue declined 1% to $471.0 million.
  • Kansas City Southern’s (KSU) revenue jumped 5% to $97.4 million.

We’ll cover Canadian National Railway’s 4Q17 operating margin change in the next part.

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