U.S. & Canada Class I Rail Operators Monthly Traffic & Commodity Mix Report

| About: Kansas City (KSU)

Summary

Class I rail operator traffic has begun the year in the same fashion as it ended 2015, weak carload traffic versus stronger intermodal traffic.

Intermodal is going to play a more important role over the long term as energy commodities face uncertain futures.

To the intermodal point, each Class I rail operator has specific arrangements and/or operational advantages which will provide varying opportunities as new developments occur.

This report is available monthly to premium subscribers to "A Focus on Freight by James Sands".

Month of January 2015: Weeks 1 Through 4

Source: Class I rail operator SEC filings and weekly carloads

As of January 2016, the Class I rail industry has taken pretty much where it left off to end 2015. Carload traffic continues to substantially underperform intermodal traffic across the board with the only exception being Kansas City Southern.

The commodity declines have been led by some of the usual suspects, but as was the case with last year, not all Class I rail operators are alike from a commodity mix perspective. The entire energy sector will continue to weigh on carload traffic for the foreseeable future. This presents a challenge to the rail industry in general as pricing has also been affected.

For intermodal, early container trends to pay attention to are slower growth from Canadian National (NYSE:CNI) versus Canadian Pacific (NYSE:CP) and the serious distance that BNSF (NYSE:BRK.B) is putting between itself and Union Pacific (NYSE:UNP). Norfolk Southern (NYSE:NSC) and CSX (NASDAQ:CSX) have initially displayed similar performance from last year, while Kansas City Southern (NYSE:KSU) is showing early weakness.

The Triple Crown service restructuring and its ripple effect should come to an end sometime during the backhalf of the year; trailer performance has been severely impacted as a result. Collectively for intermodal, these trends as always are driven by seaport international container demand, highway to rail conversions and general domestic intermodal demand, as well as service and pricing.

A primary key for intermodal is the exclusive access to certain seaports and land ports versus the trackage/haulage agreements related to these access areas. Seeking out information regarding Canadian National's exclusive access to some of Canada's largest and fastest growing seaports versus competitive dynamics between the ports of Manzanillo and Lazaro Cardenas and their relationships to Union Pacific and Kansas City Southern are just a couple of examples of how investors should be thinking about future opportunities for this industry.

Top Class I Rail Picks for Investment Consideration

  • Canadian National: Only Class I rail operator to grow revenue and earnings on a constant currency basis during 2015.
  • Union Pacific: Strong exposure to automobile industry and intermodal; may face some headwinds due to competitive factors with BNSF in the near term.
  • CSX: Strong exposure to intermodal, if management can get the international side of this segment going, the company will be poised for further growth.

Class I Rail Operator Traffic

Source: Class I rail operator weekly carloads

During the first month of 2016, U.S. and Canada Class I rail total traffic was down 7 percent versus 2015. Carload traffic repeated 2015's theme of underperforming intermodal substantially. Carload traffic improved sequentially due to seasonality, but was down nearly 14 percent versus 2015. Intermodal traffic was up nearly 2 percent versus 2015.

Source: Class I rail operator weekly carloads

BNSF

Source: BNSF weekly carloads

During the first month of 2016, BNSF rail total traffic was down 4.5 percent versus 2015. Carload traffic improved sequentially due to seasonality, but was down nearly 17 percent versus 2015. Intermodal traffic was up nearly 11 percent versus 2015.

Major laggards included coal, petroleum, sand/gravel, motor vehicles, metallic ores and food. Major traffic drivers included grain, chemicals, grain mill and other carloads. Containers performed strongly up nearly 14 percent, while trailers were down nearly 10 percent.

Source: BNSF weekly carloads

Union Pacific

Source: Union Pacific Weekly Carloads

During the first month of 2016, Union Pacific rail total traffic was down nearly 9 percent versus 2015. Carload traffic improved sequentially due to seasonality, but was down nearly 14 percent versus 2015. Intermodal traffic was down nearly 1 percent versus 2015.

Major laggards included coal, chemicals, crushed stone/gravel/sand, grain, petroleum products, grain mill products and stone/clay/glass products. Major traffic drivers included motor vehicles and equipment, food and kindred products and all other carloads. Containers were up nearly 1 percent, while trailers were down nearly 28 percent.

Source: Union Pacific weekly carloads

Norfolk Southern

Source: Norfolk Southern weekly carloads

During the first month of 2016, Norfolk Southern rail total traffic was down nearly 8 percent versus 2015. Carload traffic improved sequentially due to seasonality, but was down nearly 13 percent versus 2015. Intermodal traffic was down nearly 4 percent versus 2015.

Major laggards included coal, chemicals, metals and products, crushed stone/sand/gravel, petroleum products, grain, pulp paper and allied products and grain mill products. Major traffic drivers included motor vehicles and equipment and stone/clay/glass products. Containers were up nearly 3 percent, while trailers were down nearly 38 percent.

Source: Norfolk Southern weekly carloads

CSX

Source: CSX weekly carloads

During the first month of 2016, CSX rail total traffic was down nearly 9 percent versus 2015. Carload traffic improved sequentially due to seasonality, but was down nearly 16 percent versus 2015. Intermodal traffic was up 3 percent versus 2015.

Major laggards included coal, chemicals, crushed stone/sand/gravel, petroleum products, phosphate, grain, pulp paper and allied products, metals and products and stone/clay/glass products. Major traffic drivers included automotive (motor vehicles and equipment). Containers were up nearly 4 percent, while trailers were down nearly 16 percent.

Source: CSX weekly carloads

Canadian National Railway

Source: Canadian National Railway weekly carloads

During the first month of 2016, Canadian National rail total traffic was down nearly 8 percent versus 2015. Carload traffic improved sequentially due to seasonality, but was down nearly 14 percent versus 2015. Intermodal traffic was flat versus 2015.

Major laggards included metallic ores, chemicals, coal, petroleum products, grain, pulp and paper products, crushed stone and metal products. Major traffic drivers included motor vehicles and equipment and lumber and wood products. Containers were up 2 percent, while trailers were down nearly 97 percent.

Source: Canadian National Railway weekly carloads

Canadian Pacific Railway

Source: Canadian Pacific Railway weekly carloads

During the first month of 2016, Canadian Pacific rail total traffic was down nearly 5 percent versus 2015. Carload traffic improved sequentially due to seasonality, but was down nearly 8 percent versus 2015. Intermodal traffic was flat versus 2015.

Major laggards included coal, chemical and allied products, grain, petroleum products, motor vehicles and equipment, farm products, except grain, stone/clay/glass products and crushed stone/gravel/sand. Major traffic drivers included food and kindred products and pulp, paper and allied products. Containers were up nearly 2 percent, while trailers were down nearly 20 percent.

Source: Canadian Pacific Railway weekly carloads

Kansas City Southern

Source: Kansas City Southern weekly carloads

During the first month of 2016, Kansas City Southern rail total traffic was down nearly 3 percent versus 2015. Carload traffic improved sequentially due to seasonality, but was down nearly 2 percent versus 2015. Intermodal traffic was down nearly 4 percent versus 2015.

Major laggards included coal, motor vehicles and equipment, pulp, paper and allied products, crushed stone/sand/gravel and stone/clay/glass products. Major traffic drivers included chemicals and allied products, grain, metals and products, petroleum products and coke. Containers were down 4 percent, while trailers were down nearly 16 percent.

Source: Kansas City Southern weekly carloads

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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