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Week 16: US Freight Rail Traffic Is in Zigzag Mode

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Part 14
Week 16: US Freight Rail Traffic Is in Zigzag Mode PART 14 OF 14

Coal’s Rise Pushed Up Canadian Pacific’s Carloads in Week 16

Canadian Pacific’s carloads

Canadian Pacific Railway’s (CP) total carloads rose 14.0% in the week ended April 22, 2017. The company hauled more than 33,000 railcars that week, similar to its total carloads in the corresponding week of 2016. CP’s railcars, excluding coal, rose 12.8% YoY (year-over-year) to settle at ~27,000 units, compared to ~24,000 units in the week ended April 23, 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 12.8% YoY in the 16th week of 2017, whereas Canadian National Railway (CNI) reported a YoY rise of 16.0%.

Coal&#8217;s Rise Pushed Up Canadian Pacific&#8217;s Carloads in Week 16

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Intermodal traffic

Canadian Pacific Railway’s intermodal volumes have been rising for the past few weeks. However, in the week ended April 22, 2017, it reported a marginal 1.4% rise in overall intermodal traffic to ~19,200, from nearly 19,000 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 improvement 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 22, 2017, major rising commodity groups for Canadian Pacific were as follows:

  • potash
  • metals, minerals, and consumer products
  • chemical and plastic

The major commodity groups that fell were the following:

  • forest products
  • automotive

Investors wishing to compare this week’s freight volume data with the previous week’s data, check out Market Realist’s Week 15: US Freight Rail Traffic Rises: Are Good Times Ahead?

In this series, we’ve looked at the freight volumes of all Class I railroad companies in the United States in the week ended April 22, 2017, or the 16th week of 2017. For more information on major US railroad stocks, visit Market Realist’s Railroads page.

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