Transborder freight traffic growth spotlights the tactical case for transports
June 26, 2024
Key Observations:
North American transborder freight traffic tallied to US$138 billion in April 2024 (+9.0% YoY), says the U.S. Transportation Department in data published yesterday. This powerful rebound from a 1Q soft patch centers on the U.S.-Mexico border: two-way traffic in Apr-24 was US$72.5Bn (+15.4% YoY).
These data are fresher than the 1Q24 earnings numbers (e.g., JBHT) that seem still to be fixed in market psychology. Yet they too are backward-looking, describing these flows as they were two months ago. As our work has documented, more real-time indicators are increasingly showing that demand is stronger than older data might imply (A normal regime signal from North American rail traffic, 30-May-2024).
The data by mode are useful context for today’s sudden excitement in the shares of FedEx Corp., following its revised profit projections, plan for a share buyback, and promised strategic review of its freight segment. The transborder data show truck freight traffic (at the macro level) grew nearly 4X faster than air freight traffic, by value, in April.
Likewise, the +13.8% YoY reported increase in pipeline freight (dominated by Canadian oil flows) puts a spotlight on the sharp rebound in the share price for TC Energy Corp. (TRP). This growth also underscores the investment case for ONEOK (OKE) and Sunoco (SUN), recent acquirer of NuStar Energy. Among truckers, we note the 9% short interest in Schneider National (SNDR).
Source: DOT, Bloomberg, Blacklight Research. Note: the strong growth rates for trucks and pipes should not allow the 3% growth rate in rail to be overlooked. This is solid growth for that segment and good context for rising price of the Burlington Northern Santa Fe 3 ¼ 15-Jun-2027 bonds (Jun 25: 95.83 vs ytd low 94.64 on Apr 16).
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