Blanchard Railroad Week in Review, Fourth Quarter 2003

The Railroad Week in Review:
Third Quarter 2004

Current Issues

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Week Ending 7/2/2004
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.
Week Ending 7/9/2004
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.
Week Ending 7/16/2004
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.
Week Ending 7/23/2004
CSX wants 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.
Week Ending 7/30/2004
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 business.
Week Ending 8/6/2004
Earnings Week 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.
Second 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.
Week Ending 8/13/2004
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.
Week Ending 8/20/2004
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.
Week Ending 8/27/2004
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. Book Review.
Week Ending 9/3/2004
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 Bridge reopens.
Week Ending 9/10/2004
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.
Week Ending 9/17/2004
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.
Week Ending 9/24/2004
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 details. Table.

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Laura Blanchard, 215-985-1445, lblanchard@rblanchard.com