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A Close Look at Kansas City Southern’s Carloads

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Kansas City Southern’s carloads

In the week ended February 18, 2017, Kansas City Southern’s (KSU) total railcars rose 12.6% from the corresponding week of 2016. In the same week, KSU hauled over 25,000 railcars, compared with 22,000 units in the week ended February 20, 2016. Carloads other than coal and coke rose 8.9% YoY (year-over-year).

The company’s coal and coke carloads rose an impressive 33.6% in the seventh week of 2017. KSU hauled ~4,600 railcars of coal and coke, compared with 3,400 carloads in the corresponding week of 2016. If you want to compare this week’s freight volume data with the previous week’s, check out Market Realist’s A Light at the End of Tunnel: Rail Traffic, Week Ended February 11.

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Are coal carloads vital to KSU?

Utility coal, other coal, and petroleum coke accounted for 9% of KSU’s total revenue in 2016. The share of these commodities’ carloads in total carloads was 11.7% in 2016. Although the percentage may not seem significant, it’s still noteworthy, given the company’s small scale of operations.

The company moves coal originating from the Powder River Basin in Wyoming and coal mined in the US Midwest. Coal producers operating in that region, including Alpha Natural Resources (ANR) and bankruptcy-declared Peabody Energy (BTU), anticipated weak coal shipments in 2016. Black Hills (BKH) operates in the same region but doesn’t produce coal commercially.

Investors interested in the transportation sector could consider investing in the iShares US Industrials ETF (IYJ). Major US railroads make up 6.1% of IYJ’s portfolio.

Advancing and declining commodities

In the week ended February 18, 2017, the following commodity groups advanced:

  • grain
  • crushed stone, sand, and gravel
  • grain mill products
  • chemicals and allied products
  • motor vehicles and equipment

Major commodities that declined in the sixth week include the following:

  • food and kindred products
  • pulp, paper, and allied products
  • petroleum products
  • stone, clay, and glass products
  • metals and products

In the next part, we’ll focus on KSU’s intermodal volumes.

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