Week 18: Strong Coal Ups Kansas City Southern’s Carloads in Week 18
Kansas City Southern’s carloads
In the week ended May 6, 2017, Kansas City Southern’s (KSU) total railcars rose 15.2% from the corresponding week of 2016. Kansas City Southern hauled almost 23,200 railcars, compared with nearly 20,100 units in the week ended May 7, 2016. The company’s carloads other than coal and coke rose 12.2% YoY (year-over-year).
Kansas City Southern’s recent growth in coal and coke carloads has been phenomenal. The company’s coal and coke carloads rose a staggering 39.5% in the 18th week of 2017. The company hauled ~3,100 railcars of coal and coke, compared with nearly 2,200 carloads in the corresponding week of 2016.
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Are coal carloads vital to Kansas City Southern?
Utility coal, other coal, and petroleum coke accounted for 9.0% of Kansas City Southern’s total revenues in 2016, as well as 11.7% of its total carloads. Although that percentage may not seem significant, it’s noteworthy given the company’s small scale of operations.
Kansas City Southern moves coal originating in the Powder River Basin in Wyoming and the US Midwest. Coal producers operating in the region, including Alpha Natural Resources (ANR) and Peabody Energy (BTU), witnessed weak coal shipments in 2016. However, with the attitude of the Trump administration toward coal (ARLP) as an energy source, coal volumes are expected to be higher in 2017.
Investors interested in the transportation sector could consider investing in the iShares US Industrials ETF (IYJ). Major US railroad companies make up 6.2% of IYJ’s portfolio.
Rising and falling commodities
In the week ended May 6, 2017, the following commodity groups rose:
- crushed stone, sand, and gravel
- metals and products
- motor vehicles and equipment
- petroleum products
- chemical and products
The following commodity groups’ volumes fell:
- grain mill products
- farm products
- primary forest products
- iron and steel scrap
Next, we’ll take a look at Kansas City Southern’s (KSU) intermodal traffic in week 18.