Railroads Weekly Review: Norfolk Southern, CSX, Union Pacific

Railroad stocks took a beating last week, as Kansas City Southern (NYSE:KSU) lowered its revenue expectations on weak energy sector volumes, which includes coal, coke, frac sand and crude oil, creating panic in investors.

The weak thermal and metallurgical coal price environment and low natural gas prices present headwinds for railroads’ coal carloads. We believe that a decline in coal carloads can severely impact railroad revenues. However, the impact from declining crude oil carloads will be minimal, as crude oil accounts for around 2% of U.S. Class I railroad carloads.

In this review, we take a look at carloads of Norfolk Southern (NYSE: NSC), CSX (NYSE: CSX), and Union Pacific (NYSE: UNP), with particular focus on their energy related commodities.

Norfolk Southern

According to Norfolk Southern’s carload report, its coal carloads continued to decline, falling 10% year-on-year in the quarter to date March 21, compared to 9% in the quarter to date March 14. ^[1] Coke carloads were up 9% in the quarter to date March 21, compared to 13% in the quarter to date March 14. Norfolk Southern’s petroleum products carloads, which includes crude oil, were up 24% in the quarter to date March 21, compared to 22% in the quarter to date March 14. In the week ended March 21, intermodal volumes grew 5%, compared to 8% in the week ended March 14.

Norfolk Southern’s stock declined 5.9% over the week through Thursday. We currently have a price estimate of $105 for Norfolk Southern. For 2015, we estimate revenues of $11.9 billion, compared to a consensus estimate of $11.6 billion, and EPS of $6.84, compared to a consensus estimate of $6.80.

Click here to see our complete analysis of Norfolk Southern.

Union Pacific

Union Pacific’s petroleum products carloads declined 20% year-on-year in the quarter to date March 21, compared to 19% in the quarter to date March 14. ^[2] Its coal carloads declined 6% in the quarter to date March 21, while coke carloads were up 23%. Now that the labor contract negotiations between the ILWU and PMA have ended, Union Pacific’s intermodal carloads have also begun to recover, with an 8% increase during the week. However, on a quarter to date basis, its intermodal carloads were down 4%.

Union Pacific’s stock declined around 7.9% over the week through Thursday. The stock also suffered from the negative impact of a downgrade by Cowen. 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, compared to a consensus estimate of $6.57.

Click here to see our complete analysis of Union Pacific.

CSX

CSX’s coal carloads declined 3.5% year-on-year in the quarter to date March 21, compared to 3% in the quarter to date March 14. ^[3] Coke carloads were up 11% in the quarter to date March 21. CSX’s petroleum products carloads, were up 23% in the quarter to date March 21, compared to 28% in the quarter to date March 14. In the week ended March 21, intermodal volumes grew 1%.

CSX’s stock declined 5.4% over the week through Thursday. 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, compared to a consensus estimate of $2.14.

Click here to see our complete analysis of CSX.

View Interactive Institutional Research (Powered by Trefis):

Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap
More Trefis Research

1. Norfolk Southern Carloading Report, www.nscorp.com [↩]
2. Union Pacific’s 2015 Week 11 Carloading Report, www.up.com [↩]
3. CSX’s 2015 Week 11 Carloading Report, www.csx.com [↩]