Railroad Roundup: AAR North American Railroad Traffic (Week 4)

Summary:

Week four volumes grew 3.9% on average, marking this the 3rd week in a row, and 3 out of 4 weeks for the year.  Growth on growth remains in negative territory, though the declines are now fairly modest.  Bulk markets including coal, metallic ores and minerals are leading the way, though 7 out of 10 major product categories are now in the green.  Intermodal volumes grew 2.4% in the week, but remain in negative territory for the quarter/year (-1.6%).  UNP was the only company to report volume declines, albeit modestly.  Canadian National remains very impressive with volumes up 7% in the week, driving its quarter to date performance to +5.9% and trending ahead of our +3% estimate for the quarter.  NSC also delivered another solid week of volumes at +8.6% and is the only other company to be trending ahead of our quarterly estimate.  Overall, volumes for Rails started out a little softer than expected, but are showing progress as we move through the month of January.  For most, we will need to see a pick up in volumes over the remaining 9 weeks to hit our current estimates for the quarter.  We reiterate our positive stance on the group and Buy ratings on CSX, CP and UNP.