Canadian National Railway: The Class I Freight Story

So far in 2017, Canadian National Railway (CNI) has emerged as the front-runner in terms of YoY (year-over-year) carload growth among its Class I peers. For the past few weeks, CNI’s carloads have been rising.

In the week ended April 8, 2017, the company’s overall volumes rose 13.8% on a YoY basis. In the same week, its railcar volumes rose to almost 61,000 units from 53,500 units in the comparable week of 2016. The rise in CNI’s carload volumes outpaced the rise in overall railcar volumes in the United States and Canada in the 14th week of 2017.

CNI’s railcar volumes, excluding coal and coke, rose 13.4% in the 14th week of 2017. There was also an increase of nearly 18.0% in coke and coal products compared to 2016. Investors wanting to compare this week’s freight volume data with the previous week’s data can visit Market Realist’s Week 13: US Freight Rail Volumes on a Growth Trajectory.

Canadian National’s coal carloads, including coke, shrank just 0.10% in the 13th week of 2017. The company moved 5,800 coal and petroleum coke railcars that week. The percentage fall in CNI’s coal volumes was much lower than the 3.7% fall reported by rival Canadian Pacific (CP) in the same category.

It’s worth noting that ~4.0% of CNI’s total 2016 revenue came from coal transportation. Coal’s contribution to its total carloads was a mere 6.0% in 2016. As a result, CNI might be better positioned to avert coal’s headwinds than its peers Norfolk Southern (NSC), CSX (CSX), and Union Pacific (UNP).

Transportation sector investors can consider investing in the iShares US Industrials (IYJ). Major US railroad companies make up 6.2% of the portfolio holdings of IYJ.

In the week ended April 8, 2017, the major rising commodity groups were as follows:

• food and kindred products
• crushed stone
• metal products
• grain

The major commodity groups that reported falls included the following:

• primary forest products
• metallic ores
• nonmetallic minerals

In the next part, we’ll take a look at Canadian National Railway’s intermodal traffic.