Railroad Week in Review:
Third Quarter 2004
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CP solves its D&H
dilemma for now with new NS trackage rights and haulage agreements.
CP also moves its Detroit-Chicago ops to NS via Ann Arbor from CSX via
Grand Rapids. RailAmerica reaches sale agreement with the first of two
required enitities in Australia. Watco leases 122-mile ex-Santa Fe line
in east Texas from BNSF. Trucking stocks outperform as demand surges.
Philadelphia MPO survey finds need for rail improvements ranks high.
WIR goes technical with railroad stocks: exploring parallels between
stock performance trends and rail operating trends. Are some railroads
are raising prices to make up for sloppy operating practices as much
as they are to keep up with market trends? BNSF and UP are raising intermodal
rates out of the LA area in advance of the fall season rush. RRA's Australia
deal set back by Victoria govt. Table with estimated 2Q04 and YTD04
traffic volumes based on 2Q03 results and AAR yoy changes.
The AAR reports that the Transportation Services Index (TSI) has reached
the highest level in the 14-year period covered by the index. Chart
showing what STCCs go with which AAR commodities. Comments on the "Dow
Theory" as an indicator of what the broader market is likely to do.
Further detail on what tracks CP is to use in its new NS Detroit Connection.
RailAmerica expands in Dallas, reports June carloads. Shortline factoids
for your local legislators. Technical observations (WIR 7/9) enlarged.
to lease its "B&O Cluster" of nearly 300 miles in MD and WV in two chunks.
Union Pacific will make some changes to its I-5 Corridor effective 8/1.
Norfolk Southern has developed a whole new suite of operations management
tools. Greenbrier reports $6.4 mm in net earnings for its fiscal 3Q04
ended 5/31/2004. Meridian Southern, a 55-mile shortline in southeastern
Mississippi, has embarked on a $14 mm grant and loan program. Canadian
National's 2Q04 Operating income increased 32% on 14% more revenue.
RRA North American freight revenue rose 17% but increased ops expense
push ops income down 2%. Below the line Marino's severance package takes
a BIG bite. CSX increased freight revenues 6% and held expenses to 4%
bringing the OR down to a more reasonable 85. UP revenues topped $3
bn, up 5% but expenses rose 16% dropping ops income 38% yoy; eps drops
43%. BNSF revenue up 17%, expense up 16%, ops income up 23%, clearly
the best of class in reporting transparency and relevance to the core
Part III. CP operating income up 19% on 10% more revenue and 8% more
operating expense. GWR takes the OR down a point to 81.7 and pushed
operating income up 25% yoy. NS has a blowout Q with a 45% operating
income gain and the OR well into the 70s -- 76.2. KCS operating income
up 22%; ops expense held to 3% gain. Summary table of Big Six Class
I results. Barron's thinks spike in rail stock prices may be
over. I'm not so sure.
Quarter Statistical Review Sample Page
For the seventh consecutive quarter WIR has published its 21-page summary
of revenue and carload data by commodity plus concise Income Statements
for the major publicly traded railroad companies. Using the samed format
for every railroad operator makes comps a snap.
FEC posts 13% yoy gain in operating income for 2Q04. Table summarizing
KCS, FEC, RRA, GWR 2Q results. Why the “1818 III” investment fund managed
by Brown Brothers Harriman & Co. (BBH) sold its interest in GWR on June
1. The Top Ten North American shortline operators – excluding Class
I-owned S&Ts like the BRC, IHB or Conrail -- handle some 3.5 mm revenue
loads a year worth $1.1 bn in sales. Table ranked by annual carloads.
Providence & Worcester 2Q04 revenues up 4%, expenses up ditto. Comp
& benefits 50% of sales. KCS has an accord with TMM for control of Mexrail
and Tex-Mex. RailAmerica has final approval for Aussy sale, bids for
control of CSX' former B&O Cincy-Columbus route. Top Ten shortlines
list expanded to Top 20, now ranks by carloads per route-mile per year.
AAR July carloads compared with RRA, GWR.
UP shortline meeting loaded with takeaways for all with mealtime presentations
from Jim Young, Dennis Duffy and Jack Koraleski. UP is clearly on the
mend, anecdotal naysayers notwithstanding. Terry Towner tapped as Watco
President and COO; Rick Webb remains CEO. Class I short sales increase.
Top 20 shortlines revised to include largest one-line owners. Table.
GWR leases Peoria & Pekin Union and buys CSX Savannah Wharf branch.
RRA closes Freight Australia sale. CSX and NS complete final acquisition
of their respective Conrail portions. BNSF opens new run-through fueling
facility near Spokane. UP gets undue grief from aggregates shippers;
can the stock rally in 2005 as NS did in 2004? Governance matters. Shellpot
Comments on the AAR Fall Peak Season Forum in KC. Rail stocks rock;
UP and CSX finish week ahead in spite of (because of?) KC. Yellow Roadway
stock performance as an indicator of trucking sector outlook. Excerpts
from the trade and popular railroad press. Readers respond to my remarks
about shortline growth. Why some small shortlines may be at risk. Table.
RailAmerica August carloads, notes from recent Morgan Keegan equity
conference. Small Shortlines at Risk (WIR 9/10)creates little fuss,
yet segues well to RMI's new shortline traffic statistical service.
Industry sectors that use rail look for business upturn. Sinister implications
of shifts in union membership roles.
Rail stocks shrug off the broader market’s woes. GWR August 2004 North
American traffic up yoy for the month and quarter-do-date; South Buffalo
purchase a prime example of how to buy a railroad. More on eliminating
"black holes" in shortline event reporting. Railinc adds third module
to RailSync suite. Kaufman rebuts and adds color. RRA's Australian sale