US Class I railroads
Since the beginning of 2017, railroad stocks have risen, riding on better energy commodity prices. Among the seven Class I railroads in the United States, Canadian National Railway (CNI) is the talk of the town. In this series, we’ll compare CNI to its peer group on key financial and business parameters. That will help us know why the stock has surged more than its peers, particularly in 2Q17.
Let’s take a look at the stock prices for Canadian National Railway (CNI) and its peers since the start of 2017.
CNI’s stock performance
In the above graph, you can see that CSX (CSX), the Eastern United States’ major railway operator, has delivered the highest performance with a 48.2% return since January 1, 2017. The run in CSX stock could be due to the extremely high market expectations of its recently appointed CEO (chief executive officer) E. Hunter Harrison with his solid performance credentials from his time at Canadian Pacific Railway (CP).
Next among the highest performers is Kansas City Southern (KSU), which has risen ~22.0% since the beginning of 2017. It’s worth noting that there’s a similarity between the returns of CSX and KSU. Both stocks were driven by market speculations. KSU fell significantly after Donald Trump was elected president in November 2016. The markets were wary of the impact on KSU’s business in Mexico, given Trump’s views on Mexico.
Among the remaining railroads, Canadian National Railway (CNI) has risen 20.5% after CSX and KSU. The rise could be due to the fundamental factors that are favoring CNI. We’ll take a closer look at those in the rest of this series. Norfolk Southern (NSC) and Union Pacific (UNP) have risen 11.5% and 7.8%, respectively.
Why GWR lagged
The only exception was Genesee & Wyoming (GWR), which fell 3.0%. It’s been making many small acquisitions around the globe, mostly in the United States. But its railroad operations, apart from its acquisitions, have recently witnessed a volume deterioration in key markets such as North America.
Since the beginning of 2017, the iShares US Industrial (IYJ) has risen 11.1%. Major US railroads and airlines make up 6.3% and 4.8%, respectively, of IYJ.
Next, we’ll take a look at Canadian National Railway’s exposure to coal.