US railroad stocks
Major US railroad quarterly earnings releases start with CSX (CSX) and end with Genesee & Wyoming (GWR). Railroads’ earnings along with trucking companies’ earnings also offer insight to investors about the US’s industrial activity level. However, trucking accounts for a major share in US total transportation. For a better understanding of the 2Q17 results of major US truckload carriers, visit Market Realist’s The US Truckload Carrier Sector after 2Q17: How It All Shook Out.
How the stocks moved
Trump’s victory sent railroad stocks zooming upwards. The exception was Kansas City Southern (KSU), as Trump’s views on Mexico sent shivers down KSU investors’ spines. The President’s views on climate change also gave a new lease on life to coal in 2017. With the upturn in coal, railroad stocks gained momentum early this year. The rising crude oil prices in 1Q17 also added fuel to railroads’ fire.
The momentum in railroad stocks continued after 1Q17. However, after the second quarter results, these stocks’ upward journey seems to have taken a hit. Let’s take a look at the returns of this peer group in the last one-year period.
- CSX: 75.6%
- Norfolk Southern (NSC): 27.6%
- Union Pacific (UNP): 9.9%
- KSU: 4%
- Canadian National Railway (CNI): 21.8%
- Canadian Pacific Railway (CP): -0.3%
The iShares Dow Jones US Industrial ETF (IYJ), a benchmark ETF in the industrial space, returned 14.5% during the same timeframe.
With slow progress in US industrial output, US railroads have expressed cautious optimism for the rest of 2017. Compared to the US, Canadian industrial activity has improved so far this year. The turning point for US railroads could be the price of energy commodities, which hasn’t moved up much in 2Q17.
In this series, we’ll look at major US railroads’ income, cash flows, and balance sheets. We’ll also take a look into analysts’ opinion on the rail freight companies after their 2Q17 earnings.