Railroad Roundup: AAR North American Railroad Traffic (Week 5)

Summary:

Week 5 marks the fourth week in a row for year over year growth, and the first time in 2017 for growth on growth.  In fact, this marks only the second week in the past 52 with positive growth on growth performance.  While only a single data-point, we are cautiously optimistic there is more growth on growth to come as bulk markets strengthen and underlying economic activity firms.  By market, all categories except autos (-2%) and forest products (-5%) grew in week 5, with particular strength out of non-metallic minerals (+16%) , coal (+19%) and metallic ores (+13%).  All companies reported positive results with CNR, UNP and NSC all standing out with 7-9% y/y growth each.  CSX rounded out the bottom, though still grew 3% y/y.  Overall, we think results support the view that market conditions are slowly improving and should lead to more substantial gains by Q2.  We remain positive on Rails generally and reiterate our Buy ratings on UNP, CSX and CP.