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Kansas City Southern’s Carloads Rolled against the Tide, Up 6.6%

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Kansas City Southern’s carloads

In the week ended November 5, 2016, Kansas City Southern’s (KSU) total railcars rose 6.6% compared with the corresponding period in 2015. In the reported week of 2016, KSU hauled 24,500 railcars compared with 23,000 railcars hauled in the comparable week of 2015.

The carloads other than coal and coke rose significantly—up 12.6%—in the reported week of 2016. The rise in KSU’s carloads in the reported week was in contrast with the fall reported by US railroads, although it was in line with the percentage increase in carloads of Mexican railroads.

For a comparison with the previous week’s freight volume data, please read Market Realist’s Gauging the Economy via Freight Traffic: Week Ended October 29.

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Are coal carloads important to KSU?

In the week ended November 5, 2016, Kansas City Southern’s coal and coke railcar units fell 14.2%. In the same week, KSU hauled 4,400 units of coal and coke compared with more than 5,000 units hauled in the corresponding week in 2015.

Utility coal, other coal, and petroleum coke accounted for 9% of KSU’s total revenues in 3Q16. The utility coal and petroleum coke carloads represented 12.5% of total carloads in the same quarter. Although this metric may not be significant with respect to percentage, it holds importance given the company’s relatively small scale of operations.

Kansas City Southern moves coal originating from the Powder River Basin in Wyoming and coal mined in the Midwest US. The coal producers operating in that region, such as Alpha Natural Resources (ANR) and the bankruptcy-declared Peabody Energy (BTU), have anticipated weak coal shipments in 2016. Although Black Hills Corp. (BKH) also operates in the same region, it doesn’t produce coal commercially.

Investors interested in the transportation sector can consider the iShares US Industrials ETF (IYJ). All major US railroads make up 5.4% of the portfolio holdings of this ETF.

The advancing and declining commodities

For the week ended November 5, 2016, the main commodity groups in the green zone were:

  • grain
  • crushed stone, sand, and gravel
  • food and kindred products
  • pulp, paper, and allied products
  • metals and products

The major commodities in the red zone were:

  • grain mill products
  • chemicals and allied products
  • petroleum products
  • motor vehicles and equipment

For more information on the major US railroad stocks, please visit Market Realist’s Railroads page.

In the next part, we’ll take a look at Kansas City Southern’s intermodal traffic.

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