presentation Flashcards
High-Risk Segments
Agriculture
Automotive
Intermodal
Agriculture: Foreign Exposure
40% of Ag Exported
Agriculture: Cost Sensitivity
US has High Cost / Acre
but Low Cost / Bushel
Tariff will erase cost advantage and make Brazil and Argentina more cost competitive.
Agriculture: Price Sensitivity
2017 Paper | University of Kentucky
“EXPORT DEMAND ESTIMATION FOR U.S. CORN AND SOYBEANS TO MAJOR EXPORT DESTINATIONS”
Price of U.S. corn has a negative effect on the amount demanded by international markets.
Empirically measured PED for U.S. export corn over a 30 year period to be -5.4
I used a PED of -3
Agriculture: Demand Sensitivity
PED of -3
25% Tariff
50% Absorbed by U.S. producers
15% demand decline
Automotive: Foreign Exposure
55% are U.S. Assembled, with 50% of their value foreign sourced.
This correlates to 75% of value of automobiles in U.S. is foreign sourced.
Automotive: Price Sensitivity
Typical PED elasticity is around -0.7
Federal Highway Administration Study
Correlated New Vehicle Demand vs. Interest Rates
Using their findings, we can estimate that PED of demand in the current environment is closer to -1.5
Automotive: Tariff Sensitivity
PED of -1.5
25% Tariff
50% Absorbed by Manufacturers
10-15% demand decline.
Intermodal: Foreign Exposure
70% of North American intermodal traffic remains domestic
Intermodal: Price Sensitivity of Intermodal Cargo
Moderately inelastic (PED = -0.5) due to its diverse mix of
essential and discretionary goods.
If manufacturers absorb 50% of a 25% tariff, intermodal volumes
would decline 2%.
Intermodal: Price Sensitivity of Intermodal Shipping
oversupply of trucking capacity
PES estimated at -2
a 2% volume drop would lead to a 4% decline in pricing,
translating to a 6% revenue decline
Metals, Minerals, and Aggregates: Foreign Exposure
90% of carloads remain in country of origin
Metals, Minerals, and Aggregates: Direct Demand Sensitivity
Since most shipments are produced and consumed within the U.S., tariffs are
unlikely to directly affect volumes.
Metals, Minerals, and Aggregates: GDP Sensitivity
A 25% tariff could reduce 2025 GDP by ~150 bps,
leading to a 1–2% decline in industrial production,
correlating to a 2–4% drop in segment carloads.
Metals, Minerals, and Aggregates: Pricing Sensitivity
Carload pricing historically tracks volume changes, meaning a 2–4% drop in
carloads would result in a similar decline in price.
As a result, a 25% tariff could drive an 8% decline in
segment revenues
5% Tariff
Revenue down LSD to MSD
EBITDA down MSD to HSD
15% Tariff
Revenue down MSD to HSD
EBITDA down HSD to LDD
25% Tariff
Revenue down HSD to LSD
EBITDA down LDD
US-Mexico Exposure
BNSF: 5%
UNP: 10%
CP: 20%
US-Canada Exposure
CP: 20%
CNI: 30%
Border Exposure
NSC: 0%
CSX: 0%
BNSF: 5%
UNP: 10%
CNI: 30%
CP: 40%
Intermodal Volumes
LSD Growth
Benefit from:
+ Tighter trucking markets
+ Improved rail service
Coal Volumes
LSD Decline
(An improvement over MSD average long-term decline)
Grain + Fertilizer Volumes
LSD growth
Anticipated increase in total planted area for key North American crops.
