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Where Do Canadian Pacific’s Carloads Stand among Industry Peers?

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Canadian Pacific’s carloads

Canadian Pacific (CP) registered a YoY (year-over-year) fall of 2.3% in total railcars in the week ended October 22, 2016. The company hauled ~30,000 railcars that week, as compared to over 31,000 railcars in the corresponding week of 2015.

CP’s railcars excluding coal fell 2.8% YoY to settle just under 25,000 units during the most recent week, as compared to just over 25,000 units one year previously. CP’s carloads reported a fall in carloads, in contrast with the rise reported by Canadian railroads.

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Canadian Pacific normally receives 70% of revenues from Canada, whereas 30% comes from the US. CP’s coal carloads were almost unchanged at ~6,000 railcars, and the company’s fall in coal carloads was negligible, as compared to the 21.3% decline reported by Canadian National (CNI) in the week ended October 22, 2016.

Why coal carloads matter for CP?

Coal accounts for 10.6% of revenues and 12.3% of carloads for CP in 3Q16. The company, by and large, transports metallurgical coal destined for export through Metro Vancouver’s port. Its coal traffic in Canada begins primarily from Teck Resources’ (TCK) mines in southeastern British Columbia.

In the past year, coal production and demand have been under pressure due to depressed prices, environmental concerns, and the shift of coal-fired power plants to natural-gas-based electricity generation. Meanwhile, US steel producers’ capacity utilizations did not see marked improvement in the most recent quarter. However, TCK has issued slightly high production guidance for 2016.

If this goes according to plan, we should see either more coal hauling by CP in 2016 or less contraction in the company’s coal volumes in the same year as compared to peers.

All US-born Class I railroads can be found in the portfolio holdings of the WisdomTree Earnings 500 Fund ETF (EPS).

Frontrunners and backbenchers

Grain, potash, fertilizer and sulfur, chemicals, and plastics were all up in the week ended October 22, 2016. Forest products, crude, metals and minerals, and automotive all declined.

In the next and final part of this rail traffic series, we’ll analyze Canadian Pacific’s intermodal traffic.

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