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Canadian National Railway: The Unstoppable Freight Growth Story

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Dec. 4 2020, Updated 10:50 a.m. ET

Canadian National’s carloads

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 1, 2017, Canadian National Railway saw its overall volumes rising 8.4% on a YoY basis. In the same week, CNI’s railcar volumes rose to almost 61,000 units from 56,000 units in the comparable week of 2016.

The constant rise in CNI’s freight volumes outpaced the growth in overall railcar volumes in the United States and Canada so far this year. In the 13th week of 2017, Canadian National Railway witnessed a 9.3% rise in freight volumes excluding coal and coke.

Investors interested in comparing this week’s freight volume data with the previous week’s numbers can read Market Realist’s Week 12: North American Freight Rail Traffic on the Fast Track.

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Should investors overlook CNI’s coal exposure?

Canadian National’s coal carloads including coke shrank just 0.1% in the 13th week of 2017. The company moved 5,800 coal and petroleum coke railcars in the same week. The percentage fall in CNI’s coal volumes was much lower than the 3.7% slump reported by rival Canadian Pacific (CP) in the same category.

It’s worth noting that ~4% of CNI’s total 2016 revenue came from coal transportation. For Canadian National Railway, coal’s contribution to its total carloads was a mere 6% 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 ETF (IYJ). Major US railroad companies make up 6.2% of the portfolio holdings of IYJ.

Leaders and laggards

In the week ended April 1, 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
  • pulp and paper products
  • metallic ores
  • nonmetallic minerals

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

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