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How Union Pacific’s Carloads Stacked Up against Its Peers’

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Union Pacific’s carloads

Union Pacific (UNP) competes with Berkshire Hathaway–owned BNSF Railway (BRK-B) in the western United States. In the week ended October 29, 2016, UNP’s overall railcars fell 3.2% to over 97,000 units, compared to ~101,000 units in the corresponding week of 2015.

The company’s railcars excluding coal and coke fell 1.4% to 72,000 units in the same period. The fall in UNP’s carloads in the week ended October 29 was in tune with US rail companies’ average fall in the same category. Investors interested in digging into UNP’s 3Q16 results can read Union Pacific’s 3Q16 Earnings Show a Topsy-Turvy Ride Ahead.

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Why coal carloads matter

In the reported week, UNP’s combined coal (ARLP) and coke carloads fell 8.1% year-over-year. UNP’s coal revenue fell ~20% in 3Q16. Importantly, coal’s (CNX) share of the company’s revenue was almost 15% in the same quarter, down from 17.2% in 3Q15. UNP’s coal revenue depends on coal shipments originating in the Southern Powder River Basin (or PRB).

According to the EIA (U.S. Energy Information Administration), PRB production has fallen over the past few years, mainly due to the recession and competition from natural gas. PRB coal output is expected to fall significantly in 2016 for the first time since 1998. Competition from natural gas (UGAZ) resulting from reduced natural gas prices has been one of the main factors affecting coal output recently.

Rising and falling commodity groups

Commodities in the green zone in the week ended October 29, 2016, were as follows:

  • grain
  • crushed stone, gravel, and sand
  • waste and nonferrous scrap
  • primary forest products

The major commodity groups in the negative territory were metallic ore, nonmetallic minerals, petroleum products, metals and products, and motor vehicles and equipment.

In the next article, we’ll assess the position of UNP’s intermodal traffic in the week ended October 29, 2016.

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