Norfolk Southern’s carloads
Norfolk Southern’s (NSC) overall railcars witnessed a fall of 9.5% in the week ended August 6, 2016. Total railcars fell by more than 64,000 in the same week, as compared to more than 71,000 units in the corresponding week of 2015.
Railcars excluding coal and coke traffic declined by 5.7% in the reported week of 2016 on a YoY (year-over-year) basis. The decline in NSC’s total railcars was somewhat higher than the fall in traffic reported by US railroads in the week ended August 6, 2016.
Why do coal carloads matter for NSC?
NSC’s coal and coke traffic (ARLP) fell by 18.3% in the week ended August 6, 2016, whereas for rival CSX, the same decline was ~19%. Norfolk’s coal and coke traffic made up 26.6% of total railcars, as compared to 29.5% in 2015. Investors should note that coal (CNX) made up roughly 17% of the company’s 2015 revenues, which was down from 23% in 2009.
Coal inventory in the regions served by NSC has declined in the second quarter of 2016. According to Lee Klaskow of Bloomberg, “The fact that coal stockpiles have been coming down is a good data point for people waiting for any inclination of a bottom for coal.”
Railroads (UNP) make up part of the industrial sector. Investors seeking exposure to transportation and logistics can invest in the iShares US Industrials ETF (IYJ), whose portfolio has holdings in major US railroads (5.5%).
Leaders and laggards
In the week ended August 6, 2016, the advancing commodity groups were:
- crushed stone, sand, and gravel
- food and kindred products
- metals and products
- waste and scrap material
The major laggards in the same week were chemicals, grain mill products, grain, motor vehicles and equipment, and petroleum products.
In the next part, we’ll go through NSC’s intermodal traffic for the week ended August 6, 2016.