Norfolk Southern’s carloads
Norfolk Southern (NSC) is a major freight rail carrier in the Eastern US. NSC’s overall railcars witnessed a rise of 6.3% in the week ended July 2, 2016. Railcars totaled ~69,000 units compared to nearly 65,000 units in the corresponding week of 2015.
Even the railcars excluding coal and coke traffic increased by 6.7% in the reported week of 2016 compared to last year. The rise in NSC’s total railcars was three times the rise in rail traffic reported by rival CSX (CSX) during the week.
Why coal carloads matter for NSC
NSC’s coal and coke traffic went up by 5.0% in the week ended July 2, 2016, on a year-over-year basis. For rival CSX, the rise was 4.5%. The year-over-year rises occurred because the July 4 holiday wasn’t included in the reported week of 2016. Norfolk’s coal and coke traffic in the latest reported week of 2016 formed 19% of total railcars against 18.6% in the previous year. Investors should note that coal formed roughly 17% of the company’s 2015 revenues, coming down from 23% in 2009.
Environmental regulations and the shift from coal-fired electricity to natural-gas-based electricity in the recent past have impacted coal production across the US. The slowdown in US steel production has negatively impacted the demand for metallurgical coal. Lower crude oil prices in the past have affected coal producers such as Alliance Resource Partners (ARLP), Peabody Energy (BTU), and CONSOL Energy (CNX). In fact, BTU filed for chapter 11 bankruptcy protection on April 13.
Railroads make up part of the industrial sector. Investors seeking exposure to transportation and logistics can invest in the iShares US Industrials ETF (IYJ), which invests 5% of its portfolio in major US railroads.
Leaders and the laggards
In the week ended July 2, 2016, the advancing commodity groups were:
- iron and steel scrap
- motor vehicles and equipment
- stone, clay, and glass products
The major laggards in the same week were chemicals, petroleum products, pulp, paper, and non-metallic minerals.
You can compare this week’s rail data with data from the previous week in Why the Week Ending June 25 Was a Mixed Bag for Rail Traffic.
For more information on major US railroad stocks (IYT), visit Market Realist’s railroads page. In the next part, we’ll go through NSC’s intermodal traffic for the week ended July 2, 2016.