On Friday, we’ll hear third-quarter financial results from two important players in the intermodal industry: J.B. Hunt and Kansas City Southern (KCS). In our view, the most important issues at stake are the degree to which the respective management teams believe the COVID-juiced surge in intermodal volumes is sustainable into the fourth quarter and beyond. 

 

From KCS, we want to learn from Pat Ottensmeyer and his team what, in their view, is holding Mexico carloads and intermodal volumes back when the United States- Mexico-Canada Agreement (USMCA) and disruptions on trans-Pacific trade lanes should be benefiting the Mexico-U.S. trade relationship.

 

Hunt’s management has been forthright about the difficulties of managing physical intermodal assets and a large drayage fleet due to COVID’s distortion of normal demand patterns. The cost of using its own drivers to reposition empty containers across its intermodal network hurt Hunt’s operating margins last quarter. We want to know what adjustments Hunt has made and, broadly speaking, the outlook for West Coast intermodal capacity going forward.

 

As earnings season progresses, analysts and industry watchers will read the tea leaves of railroad management commentary to try and gauge the rails’ appetite for further and, dare we say, permanent intermodal volume growth.

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