Major US railroads
Class I railroad stock performances act as a barometer of economic health in the US. With the arrival of Trump administration, railroads saw a boost, after being hurt by weak energy prices last year.
Meanwhile, Trump’s plan to bring life back to coal power plants brought optimism to the railroad industry, and with the upturn in coal in 2Q17—a major revenue-earner for railroads—the quarterly results of railroad stocks in 2017 began to shine.
Stock price performance after 2Q17
Energy commodity prices caught momentum in 1Q17 on a YoY (year-over-year) basis, and PMIs (purchasing managers’ indexes) also pointed toward a gradual improvement in US manufacturing output.
The sharp upward trend in railroad stocks began after the 1Q17 results. But after the 2Q17 earnings announcements, momentum has cooled down, though many stocks managed to keep moving upward, as you can see in the following returns since August 1, 2017:
- Norfolk Southern (NSC): 16.4%
- CSX (CSX): 8.6%
- Union Pacific (UNP): 12.1%
- Kansas City Southern (KSU): 4.2%
- Canadian National Railway (CNI): 3.8%
- Canadian Pacific Railway (CP): 7.5%
- Genesee & Wyoming (GWR): 11.4%
The SPDR S&P Transportation ETF (XTN) has returned 9.1% in the same period.
In this series, we’ll analyze share repurchases by US railroads and compare them with free cash flow levels. We’ll also analyze other key actions taken by Class I railroads in recent quarters.