Railroads Weekly Review: Norfolk Southern, CSX and Union Pacific

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Norfolk Southern

Railroads are likely headed for trouble in the first quarter. Norfolk Southern (NYSE: NSC) and CSX (NYSE: CSX), which operate in the eastern U.S., will likely bear the brunt of the bad weather experienced over the past month, while Union Pacific (NYSE: UNP) faces headwinds from disruptions at the West Coast ports, which have already begun to impact its intermodal volumes. Below we take a look at these railroads’ most recent carloading report.

Norfolk Southern

Norfolk Southern’s carloading report for the week ending February 14 revealed a 44% year-on-year increase in year-to-date crushed stone, sand and gravel shipments. [1] This growth is most likely due to poor comparables from the previous year’s first quarter. Its petroleum products and chemicals carloads grew 22% and 5%, respectively, on growing production of crude oil in the U.S. Intermodal carloads increased 8% over the same period.

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Norfolk Southern’s stock declined around 1.5% over the week through Thursday. We currently have a price estimate of $105 for Norfolk Southern. For the year 2015, we estimate revenues of $11.9 billion, compared to a consensus estimate of $11.6 billion, and EPS of $6.84, in line with consensus estimates.

Click here to see our complete analysis of Norfolk Southern.

CSX

The highlight of CSX’s carloading report for the week ending February 14 was its year-to-date petroleum products carloads, which have grown 34% compared to the same period in the previous year. Its grain shipments increased 15%. The report also revealed a 5% increase in intermodal shipments. [2] Similar to Norfolk Southern, CSX’s carloads of crushed stone, sand and gravel increased 34% due to cycling of the previous year’s low comparables.

CSX’s stock declined 1.5% over the week through Thursday as a train carrying crude oil derailed in West Virginia and burst into flames. We currently have a price estimate of $28 for CSX. For the year 2015, we estimate revenues of $13.0 billion, compared to a consensus estimate of $12.9 billion, and EPS of $2.16, in line with consensus estimates.

Click here to see our complete analysis of CSX.

Union Pacific

Union Pacific’s petroleum products carloads declined 15% through the first quarter to date ended February 14. [3] Narrow spreads between Western Texas Intermediate (WTI), produced in the U.S., and Brent crude oil, which is sourced from the North Sea, and high crude production in the PADD 3 regions have eaten into Union Pacific’s crude oil carloads leading to a decline in its petroleum carloads. The railroad’s intermodal carloads have declined 5% as a result of the extended labor contract negotiations between the ILWU and PMA.

Union Pacific’s stock gained around 0.5% over the week through Thursday. We currently have a price estimate of $105 for Union Pacific. For the year 2015, we estimate revenues of $25.3 billion, compared to consensus estimate of $25.0 billion, and EPS of $6.61, line with consensus estimates.

Click here to see our complete analysis of Union Pacific.

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Notes:
  1. Norfolk Southern Carloading Report, www.nscorp.com []
  2. CSX’s 2015 Week 6 Carloading Report, www.csx.com []
  3. Union Pacific’s 2015 Week 6 Cardloading Report, www.up.com []