How Major US Railroads Fared in 2Q17 PART 5 OF 11
Volumes of major Eastern US carriers
In this article, we’ll discuss the changes in volumes for US railroads in 2Q17. After a dismal last year, 2017 rekindled hopes for these railroads with momentum in energy commodities prices. Freight volumes primarily drive their top-line growth, followed by pricing gains. Normally pricing gains are possible when commodities’ prices show an upward trend.
Eastern railroads’ freight volume changes
For Norfolk Southern (NSC), major commodity groups with higher volumes on a year-over-year basis in 2Q17 were crushed stone, sand, and gravel, grain, metals and products, as well as non-metallic minerals. Commodity groups with a negative change in freight volumes in the same quarter were chemicals, motor vehicles and equipment, and petroleum products along with stone, clay, and glass products.
Norfolk’s rival CSX (CSX) reported major gains in commodity groups such as chemicals, farm products excluding grain, non-metallic minerals, and crushed stone, sand, and gravel. The company posted volume losses in grain, food products, petroleum & petroleum products, pulp & paper, iron and steel scrap, as well as motor vehicles and parts.
Volume change of Western US railroads
The prominent rising commodity groups for Union Pacific (UNP) in 2Q17 were grain, crushed stone, sand, and gravel, lumber and wood products, chemicals, and metals and products. On the other hand, volumes of metallic ores, nonmetallic minerals, petroleum products, and motor vehicles and equipment plummeted in the reported quarter.
UNP’s main competitor, BNSF Railway (BRK-B), reported volume gains in grain, metallic ores, sand and gravel, metals, as well as motor vehicles. Commodities that reported volume loss were pulp & paper, petroleum, non-metallic minerals, and forest products.
Change in volumes of Canadian railroads
For Canadian National Railway (CNI), the key commodity groups in the green zone were petroleum & chemicals, metals & minerals, automotive, as well as grain, and food & kindred products. The major commodity groups in the red zone were primary forest products, grain mill products as well as stone, and clay & glass products.
CNI’s arch rival, Canadian Pacific Railway (CP), reported freight volume gains in grain, potash, as well as metals, minerals, and consumer products. Automotive and forest products were the major commodity groups with negative year-over-year volumes in 2Q17.
Genesee & Wyoming’s (GWR) same railroad operations saw a volume decline of 0.1% in 2Q17. The volume decline was reported mainly in the UK/European operations of the company. Coal volumes took a major hit in that geography for GWR.
The iShares Core S&P 500 ETF (IVV) is a growth ETF related to the Standard & Poor’s 500 Index. Including GWR, all the US-originated Class I railroads are in IVV’s portfolio holdings.
Let’s look at the operating margins of these railroads in 2Q17.