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Week 16: US Freight Rail Traffic Is in Zigzag Mode

PART:
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Part 12
Week 16: US Freight Rail Traffic Is in Zigzag Mode PART 12 OF 14

Canadian National Railway: Volumes on Track in Week 16

Canadian National’s carloads

Since January 1, 2017, Canadian National Railway (CNI) has clearly emerged as the top Class I railroad company in terms of YoY (year-over-year) rises in volumes. For the past few weeks, CNI’s carloads have been rising continuously.

In the week ended April 22, 2017, the company’s overall volumes rose 16.0% on a YoY basis. In the same week, its railcar volumes rose to almost 63,000 units, compared to 54,000 units in the comparable week of 2016. The rise in CNI’s carload volumes outpaced the rise in overall railcar volumes in the United States and Canada in the 16th week of 2017.

Canadian National Railway: Volumes on Track in Week 16

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CNI’s railcar volumes excluding coal and coke rose 17.3% in the 16th week of 2017. There was also a rise of nearly 5.0% in coke and coal products compared to 2016.

Should we overlook CNI’s coal exposure?

Coal carloads, including coke for Canadian National Railway, rose 5.0% in the 16th week of 2017. The company moved ~6,000 coal and petroleum coke railcars that week. The percentage rise in CNI’s coal volumes was much lower than the 15.0% rise reported by rival Canadian Pacific (CP) in the same category.

It’s worth noting that ~4.0% of CNI’s total 2016 revenue came from coal transportation. Coal’s contribution to the company’s total carloads was a mere 6.0% in 2016. As a result, CNI might be better positioned to avert coal’s headwinds than its peers Norfolk Southern (NSC), CSX Corporation (CSX), and Union Pacific (UNP).

Transportation sector investors can consider investing in the iShares US Industrials ETF (IYJ). Major US railroad companies make up 6.2% of the portfolio holdings of IYJ.

Leaders and laggards

In the week ended April 22, 2017, the major rising commodity groups were as follows:

  • food and kindred products
  • grain
  • crushed stone
  • metal products

The main falling commodity groups were the following:

  • primary forest products
  • grain mill products
  • pulp and paper products
  • lumber and wood products

In the next article, we’ll take a look at Canadian National Railway’s intermodal traffic in the 16th week of 2017.

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