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Week 15: US Freight Rail Traffic Rises: Are Good Times Ahead?

PART:
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Part 14
Week 15: US Freight Rail Traffic Rises: Are Good Times Ahead? PART 14 OF 14

Canadian Pacific Railway: Inside the Freight Volumes in Week 15

Canadian Pacific’s carloads

Canadian Pacific Railway’s (CP) total carloads rose 6.1% in the week ended April 15, 2017. The company hauled more than 34,000 railcars that week, similar to its total carloads in the corresponding week of 2016. CP’s railcars, excluding coal, rose 9.3% YoY (year-over-year) to settle at ~27,000 units compared to ~25,000 units in the week ended April 16, 2016.

Canadian Pacific Railway normally earns 70.0% of its revenue from Canada and 30.0% from the United States. Its non-coal carloads rose 9.3% YoY in the 15th week of 2017, whereas Canadian National Railway (CNI) reported a YoY rise of 16.4%.

Canadian Pacific Railway: Inside the Freight Volumes in Week 15

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Intermodal traffic

The intermodal volumes of Canadian Pacific Railway have been rising for the past few weeks. However, in the week ended April 15, 2017, it reported a 2.3% fall in overall intermodal traffic to ~18,700, from nearly 19,100 carloads in the corresponding week last year.

Why coal carloads matter to CP

Coal accounted for 11.0% of CP’s revenue and 12.0% of its carloads in 2016. The company mainly transports metallurgical coal meant for export through Metro Vancouver’s port. Its coal traffic in Canada begins primarily at Teck Resources’ (TCK) mines in southeast British Columbia.

During the past year, coal production and demand have been under pressure due to depressed prices, environmental concerns, and a shift away from coal-fired power plants to natural gas–based electricity generation. US steel producers’ capacity utilizations didn’t see marked improvements in the recent quarter either.

All US-born Class I railroad companies (UNP) make up part of the portfolio holdings of the WisdomTree Earnings 500 ETF (EPS).

Commodity groups

In the week ended April 15, 2017, major rising commodity groups for Canadian Pacific were as follows:

  • potash products
  • metals, minerals, and consumer products

The major commodity groups that fell were the following:

  • fertilizer and sulfur
  • chemicals and plastic

In this series, we looked at the freight volumes of all Class I railroads in the United States in the week ended April 15, 2017, or the 15th week of 2017. For more information on major US railroad stocks, please visit Market Realist’s Railroads page.

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