Norfolk Southern’s carloads
Norfolk Southern (NSC) and CSX (CSX) run a near-duopoly in the Eastern US. In the week ended November 12, 2016, NSC’s overall railcars witnessed a 1.4% fall. During the week, NSC had 66,000-plus total railcars in the same week compared with 67,000-plus units in the corresponding week in 2015.
The number of railcars excluding coal and coke traffic increased slightly in the reported week of 2016 on a year-over-year basis. NSC’s falling number of railcars were in contrast with the marginal rise reported by US railroads in the same category.
Investors who are interested in NSC’s detailed 3Q16 results can refer to Norfolk Southern’s Q3 Earnings: Must-Knows.
Why coal carloads matter for NSC
Coal (CNX) formed 15% of NSC’s 3Q16 revenues, coming down from 23% in 2009. NSC’s coal and coke traffic (ARLP) fell 4.7% in the week ended November 12, 2016. On a year-to-reported-week basis, coal carloads were down 19%.
In its 3Q16 conference call, NSC’s management stated that the warm summer and sequential rise in natural gas prices reduced the contraction in utility coal volumes. However, the company expects that higher stockpiles will be a hindrance for the rise in coal carloads going forward.
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). Major US railroads make up 5.6% of the portfolio holdings of IYJ.
Leaders and the laggards
In the week ended November 12, 2016, the advancing commodity groups were:
- crushed stone, sand, and gravel
- metals and products
- iron and steel scrap
- waste and scrap material
The major laggards during the week were:
- grain mill products
- motor vehicles and equipment
- petroleum products
- pulp, paper, and allied products
For a comparison with the previous week’s freight volume data, please read Key Railroads’ Freight Volumes for the Week Ended November 5.