Union Pacific’s carloads
Union Pacific (UNP) competes with Berkshire Hathaway–owned BNSF Railway (BRK-B) in the Western US. In the week ended November 12, 2016, UNP’s overall railcars posted a ~1% rise. The railcars in the same week rose to 97,000 units from nearly 96,000 units in the corresponding week in 2015.
UNP’s railcars excluding coal and coke rose 4.6% to nearly 72,000 units in the latest reported week of 2016. The percentage rise in UNP’s carloads in the week ended November 12, 2016, was in line with the slight increase reported by US railroads in the same category.
Investors interested in a detailed look at UNP’s 3Q16 results can refer to Market Realist’s Union Pacific’s 3Q16 Earnings Show a Topsy-Turvy Ride Ahead.
Why coal carloads matter
In the reported week, UNP’s combined coal (ARLP) and coke carloads fell 8.1% on a year-over-year basis. This Omaha-headquartered carrier’s coal revenues fell ~20% in 3Q16.
Importantly, coal’s (CNX) share of the company’s revenues was almost 15% in the same quarter, down from 17.2% in 3Q15. UNP’s coal revenues depend on coal shipments originating in the Southern Powder River Basin (or PRB).
According to the EIA (Energy Information Administration), the PRB’s production has declined over the past few years, mainly due to the recession and competition from natural gas. Its coal output is expected to fall significantly in 2016—the first such fall since 1998. Competition from natural gas (UGAZ) resulting from reduced natural gas prices has been one of the main factors affecting coal output.
Advancing and declining commodity groups
Commodities in the green zone in the week ended November 12, 2016, were:
- metals and products
- motor vehicles and equipment
- iron and steel scrap
The major commodity groups in negative territory were:
- metallic ores
- nonmetallic minerals
- lumber and wood products
- waste and non-ferrous scrap
- nonmetallic minerals
For a comparison with the previous week’s freight volume data, please read Market Realist’s Key Railroads’ Freight Volumes for the Week Ended November 5. Investors interested in railroad stocks can get more information on Class I US railroads on Market Realist’s Railroads page.
In the next part, we’ll assess the position of UNP’s intermodal traffic in the week ended November 12, 2016.