Investopedia: Here Comes The Tricky Part For Rail Traffic

Railroads are a classic example of a derivative industry - that is, they produce nothing on their own and the demand for their services is a product of (a derivative) the demand for other goods. That is something that is worth keeping in mind as the railroads continue to meet anniversary dates in this economic recovery and face increasingly difficult comparisons. 

February - Another Quarter of Mixed Data 

January's rail traffic data, which we highlighted in our Raid Traffic Data Still Largely Good News article, was mostly positive but had a few worrying signs - namely the slowdown in intermodal traffic in the U.S. and weaker rail performance in Canada. Like January, February's data was not as clean as economic optimists might have hoped.

U.S. rail traffic increased more than 4% from last year (and almost 3% from 2009) and intermodal traffic increased more than 10%. Unfortunately, the sequential performance was not nearly so strong - rail traffic slid 3% from January's level, while intermodal activity was up only a fraction of a percent. As intermodal is a profitable growth area for railroad operators like Union Pacific (NYSE:UNP) and Berkshire Hathaway's (NYSE:BRK.A) Burlington Northern, that is not an insignificant figure.

While bad weather seems to have had a significant impact, investors should at least consider this a yellow flag until the next month or two of data confirm that February's performance was just a weather-related anomaly.

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