14 Feb

Inside Kansas City Southern’s Rising Carloads

WRITTEN BY Samuel Prince

Kansas City Southern’s carloads

In the week ended February 4, 2017, Kansas City Southern’s (KSU) total railcars rose 12.6% from the corresponding week of 2016. In the fifth week of 2017, KSU hauled over 26,000 railcars, as compared to more than 23,000 units in the week ended February 6, 2016. Carloads other than coal and coke rose 7.4% YoY (year-over-year).

The company’s coal and coke carloads rose a phenomenal 39.1% in the fifth week of 2017. KSU hauled ~5,400 railcars of coal and coke, as compared to 3,800 carloads in the corresponding week of 2016.

Inside Kansas City Southern’s Rising Carloads

Why coal carloads are important 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 might consider investing in the iShares US Industrials ETF (IYJ). Major US railroads make up 6.4% of IYJ’s portfolio holdings.

Advancing and declining commodities

In the week ended February 4, 2017, the following commodity groups advanced:

  • grain
  • crushed stone, sand, and gravel
  • motor vehicles and equipment
  • iron and steel scrap

Major commodities that declined included the following:

  • petroleum products
  • chemicals
  • metals and products
  • waste and non-ferrous scrap

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

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