Comparing Norfolk Southern’s Carloads with Industry Volumes

Norfolk Southern (NSC) and CSX (CSX) run a virtual duopoly in the Eastern US. In the week ended December 3, 2016, NSC’s overall railcars witnessed a minor rise of 0.7%. The total railcars rose to ~69,000 in the same week against 68,000-plus units in the corresponding week in 2015.

The railcars excluding coal and coke traffic rose 3.5% in the reported week of 2016 on a year-over-year basis. NSC’s rise in railcars was almost on par with the rise reported by US railroads in the same category.

Investors interested in NSC’s detailed 3Q16 results can read Norfolk Southern’s Q3 Earnings: Must-Knows.

Investors should note that coal (CNX) formed 15% of NSC’s 3Q16 revenues, coming down from 23% in 2009. NSC’s coal and coke traffic (ARLP) fell 6.6% in the week ended December 3, 2016. On a year-to-reported-week basis, coal carloads fell 17.8%.

In its 3Q16 conference call, NSC stated that the warm summer and the sequential rise in natural gas prices have reduced the contraction in utility coal volumes. The company expects that higher stockpiles could 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.

In the week ended December 3, 2016, the advancing commodity groups were:

• metals and products
• grain
• waste and scrap material
• stone, clay, and glass products
• motor vehicles and equipment

The major laggards during the same week were:

• chemicals
• grain mill products
• petroleum products
• pulp, paper, and allied products

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

In the next part, we’ll go through NSC’s intermodal traffic for the week ended December 3, 2016.