Blanchard Railroad Week in Review, Second Quarter 2017

The Railroad Week in Review:
Second Quarter 2017

Current Issues. Available in Adobe Acrobat format only. You will need the free Adobe Acrobat reader.

Week ending June 30
The 2017 second quarter has ended. It'll be another week or so before we see the final volume counts, but the view from Week 24 (ended June 17) is encouraging. BNSF/UP comps in shortline commodities (chart). Separating STCC 28 chems from STCC 29 petrochems and crude oil. How to find trends. Is there a better way than % of revs to compare Class I railroad capex spends?

Week ending June 23
Spuds by Rail Idaho-Penna via Watco, UP, NS; paying attention to customer requirements makes it work. Pictures. The latest on leasing, tank cars, small cube hoppers; why turning cars promptly is even more imperative. Texas shortline operator TNW turns 35. GWR gets high marks for Free Cash Flow; pre-blocking for CSX noted.

Week ending June 16
CP President & CEO Keith Creel on the role of customer service in creating new markets; sees short lines as key to extending the franchise. Kentucky shortline operator R. J. Corman Railroad celebrates its 30th anniversary. Severe flooding and washout conditions cause OmniTRAX to suspend operations on key segments of its Hudson Bay Railway (HBR); does not expect to be able to resume operations before the winter season. Genesee & Wyoming May North America carloads up 1.8%; without P&W for clear year-over-year same-railroad comps, down 1.1%. Morgan Creek Management's Mark Yusko predicts Q3 recession (others say 2018). On the folly of closing too many yards too fast (WIR June 9).

Week ending June 9
The false economy of shutting too many hump yards; the idea of running freight past closed yards so it can be switched elsewhere has downsides. GWR completes acquisition of HOG parent; how it reinforces the GWR contiguous model. Why standardizing on the 60-foot, 100-ton, Plate F boxcar could drive some commodity O-D pairs away; why such consequences reinforce the going-out-of-business perception of single-carload railroading.

Week ending May 26
Eavesdropping on railroad presentations at Royal Bank of Canada (CP, CN) and Bank America Merrill Lynch (CSX, UP, KCS, NS); CSX provides excellent window on recent developments. NS Annual Short Line Meeting notes and observations.

Week ending May 19
Schwab's Randy Frederick on the direction of the economy as well as where the market may be heading; market volatility and the retail sector. UBS explains reasons contributing to the recent upsurge in coal loadings; message to railroads -- take what you can while you can. Precision Railroading and local management buy-in.

Week ending May 12
BNSF first quarter revenue increased 8.9% to $5.0 billion as revenue units were up 6.4% to 2. 5 million loads; average revenue per unit including fuel surcharge was up 2.7% to $2,005. Genesee & Wyoming April carloads for North America were essentially unchanged, except for the P&W acquisition; I'm encouraged to see the six top commodities continue to provide a refreshing diversity to the carload mix. All the Big Six Class I first quarter results are in; CN takes first place in 5 out of 7 scoring categories. Why Buffett and Munger don't like using ebitda to value companies.

Week ending May 5
GWR total world-wide Q1 revenue increased 7.6% to $519K, ops income was up 35.9% to $77.5 million, as ops expense increased less than four points; North American revenue was $320K, up 6.6%, as carloads gained 5.2%, up 20K units, of which 15K were coal. UBS opines that "the energy supply overhang is set to reverse on robust global demand." Sitting DUCS ripe for tapping, bodes well for a handful of short lines. Chart.

Week ending April 28
First Quarter Results: Canadian National total revenue increased 8% to C$3.8 billion on 9% more rev units, 1.4 million; merchandise carload revenue gained 7% on 11% more units as RPU dropped 4%. Norfolk Southern total revenue increased 6% to $2.6 billion on 1.9 million revenue units, up 5% to 1.8 million; the Metals/Construction group was the best merch carload performer, up 9% mainly on raw steel and drilling-related commodities. Union Pacific total revenue increased 6% to $4.8 billion on roughy equal parts volume, fuel surcharge, and mix/core price; revenue units increased 2% to 2.1 million, led by a 16% increase in coal and 6% more ag products carloads.

Week ending April 21
CSX kicked off the Q12 earnings season with revenues up 9.6% to $2.9 billion on 1.6 million revenue units, up 2.6%; merchandise carload revenue increased 6.1%. Canadian Pacific first quarter revenue increased one percent to $C1.6 billion on a 1.8% gain in revenue units and an 0.8% dip in RPU; operating expense declined by 60 basis points, helping operating income to a 2.8% gain. Kansas City Southern posted record first quarter revenues of $610 million, an increase of 8.3% over first quarter 2016 on a 5.5% increase in revenue units and a 3.6% RPU increase. Genesee & Wyoming March and quarterly carloads are up 3.5% and 5.2%, respectively. The coal portion of last week's first quarter carload mix commentary needs some elaboration.

Week ending April 14
AAR North American revenue units for the first quarter increased 4% over last year's Q1, about two points better than I'd expected; coal the major driver. Employment stats and the freight outlook. Dynamic Car Scheduling as one solution to irregular and unpredictable transit times.

Week ending April 7
More on why homebuilding trend data is a must-watch for railroaders; AAR charts. How OmniTRAX makes its "Rail Made Easy" slogan work. Conrail and North Shore win Railway Age awards; presentations at ASLRRA Annual later this month. Why I think Precision Railroading will work well for CSX.

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