WIR 2019, Second Quarter

Week ending June 28
Longer trains and less interim car handling can’t be all that good for single-car shipments not moving in unit trains. Paper commodity group is still in a funk — boxmakers who typically expect to see a seasonal uptick in demand by mid-June have yet to see any signs of a pickup as demand remains sluggish. IORY and Ohio Rail Development Commission get access to nearly $7 mm in funding for upgrading and adding to industrial trackage. A look at the BNSF O-gauge layout on display at the Berkshire Hathaway Annual Meeting.

Week ending June 21
This AAR graph clearly shows the continuing downward trend of railroad revenue units; continue the trend line down and see that, at this rate, the railroads will have no customers left by the year 2023 or so. CSX ’s Foote on reversing the trend; fitting short lines into the trip plan matrix. PMI contracting along with railroad revenue units.

Week ending June 14
North American rail volume for 2019 through May came in at 14.7 million units, down 1.4 percent YOY; merch carloads, ex-coal, including automotive, were 5.5 million, down two percent YOY. How CSX defines and uses the AAR Performance Measures. Beware financialization: A look at a sample Class I undergoing significant change to see where those changes were manifesting themselves. Warren Buffett on PSR: There’s been growing evidence from the actions of [the PSR] railroads that we can learn something from what they do.

Week ending June 7
Union County Industrial Railroad wins new light petroleum products terminal and bulk storage facility; this is the second major new rail customer coming on line in the past year. Reader response to last week’s screed on the state of the short lines garners telling observations — “A sobering newsletter.” “Observations completely in line.” “Prices to the point that cash flow cannot support the property offered.” CSX unclear on the meaning of “transit time” and trip plan compliance.” Why “fair value” is more important than the asking price.

Week ending May 31
Frank Lonegro, CSX Chief Financial Officer, is leaving the company after 19 years’ service; a successor has not been named. Changes in the short line railroad scene since Staggers — has the buying and selling of short lines been a financial game and is that game up? The railroads could be risking market losses by charging shippers excessive fees; it is possible PSR railroads are focused on changing customer behavior through aggressive penalties.”

Week ending May 24
Notes from the Wolfe Research 12th Annual Global Transportation Conference. Watco: “We never assume we’ll get the last look and we always operate on the premise that Crazy is undefeated.” GWR: North American M&A market is “very active.” KCS: Using the PSR initiative to make service better and more predictable. UP: Key Performance Indicators (KPIs) are all moving in the right direction as the railroad rolls out its Unified Plan 2020. CSX: Wallace sees a “huge opportunity” with short lines. Trend: Weights per shipment are trending down and frequency of shipments is trending up; good for intermodal, not so good for carload.

Week ending May 17
Tariff wars and domestic transportation; US imports from China are 15 percent of ten percent or 1.5 percent of total US imports. Why I don’t pay much attention to the changes in weekly AAR carloads; the rate of change over the past year is essentially zero. GWR revenue units for North America in April increase 2.9 percent vs. 2018. Of the seven commodities comprising 80 percent of total rev units, three were up with double-digit gains.

Week ending May 10
CSX, Allegheny Valley Railroad ink an agreement for AVR to purchase the nearly 50 miles of CSX-owned rails AVR has operated in the Pittsburgh area for the past 15 years. Nebraska Central Railroad copes with flooding and bridge damage in Nebraska. BNSF reports Q1 revenue up 2.5% to $5.6 billion; operating income increases 2.3% to $1.8 billion. Union Pacific 4014 shows off in Wyoming, spectacular sustained-running YouTube video link.

Week ending May 3
Canadian National increases RTMs three percent on essentially unchanged revenue units — up 70 basis points; merchandise vols including automotive up double that. Genesee & Wyoming reports 393,857 first quarter revenue units for North America, down three percent; freight revenue increases three percent. Why listening to the Q&A on earnings calls is edifying.

Week ending April 26
Canadian Pacific Q1 revenue units down two percent year-over-year, operating income gains less than a point; while the first quarter had its challenges, the second quarter is off to a very good start. Norfolk Southern make substantial strides in strengthening the franchise in the first quarter; service & productivity metrics provide on-time delivery performance in terms of plan adherence.

Week ending April 19
CSX opened the Q1 earnings season with total revenue up 5% to $3.0 billion on 1.5 million revenue units, unchanged from a year ago; good news for short lines — merchandise carloads up 3.1% percent, revenues up 5.6%, and RPUs up 2.4%. KCS revenue increased 5.7% to $675 million even though revenue units slipped 1.4%. UP total revenue $5.4 billion, down 2%, on 2.1 million revenue units, down 2%. The common thread throughout is how running a scheduled railroad to plan creates a more reliable transportation product at a lower cost to the provider. I expect NS, CP, and CN will continue the theme.

Week ending April 12
BNSF 1Q revenue units per AAR report; total revenue units off 5.2 percent year-over-year, with Industrial Products gaining two points. OmniTRAX takes recognition of individual and team performance to new levels; awards for safety, leadership, commercial, and operational successes. Pennsylvania shortline operator Regional Rail LLC sold to London-based investment manager 3i Group. Class Is getting aggressive on demurrage; STB hearings on same scheduled for next month.

Week ending April 5
Canadian National to invest some C$320 million in Ontario this year; entire CN shortline community gains from improved competitive access for their customers’ customers in Ontario. Union Pacific presentation at the recent JP Morgan transportation conference provides vital intelligence for short lines is everywhere; UP week 13 AAR carloads YTD comps. Railway Age comments on AAR March carloads.

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