Railroad Week in Review:
First Quarter 2018
Issues. Available in Adobe Acrobat format only. You will need the free Adobe
Week ending March 30
How to use the AAR's Rail Time Indicators to find out where the carloads are and are not; further detail with weekly traffic data on the AAR website. Why the quality of Class I freight rail service is not even close to what it can be and must be: Customer favor is rooted in the reduced variability of transit times. Lessons to be learned from the One Train Railroad cautionary tale. Pennsylvania approves $32 million for 27 freight-railroad improvement projects. Now go find customers.
Week ending March 23
How fuel surcharges distort quarterly results; why railroad pricing needs to have more transparency. Why demand for railcar storage space is slowing down as stored cars are being put back into service. STB sends letters to all eight North American Class I railroad CEOs asking for detailed comment on the service outlook for their railroads "in the near term and for the balance of 2018;" specific areas of concern: loco availability, employee resources, local service performance, customer demand, and capacity restraints.The quarter ends next week. AAR rev units all-ini thru Week 11 (Mar 17) up 2.4%; carloads ex-IM but incl coal down 1.3%. All commodity lines except chems, non-metallic minerals (mainly frac sand and aggregates, and petrol products (crude oil, peters chems, NGLs) showing YOY losses. Not encouraging for short lines.
Week ending March 16
Genesee & Wyoming revenue units are off 60 basis points year-over-year; the usual suspects — coal, ag products, aggregates, chems, forest products, and metals — continue to dominate the group that contributes 80 percent of GWR total carloads. Class 8 (heavy-duty) truck orders are surging; lack of driver availability remains the chief capacity constraint. Increased steel tariffs could spur railcar orders before morphing into a threat to car builders.
Week ending March 9
Notes from the CSX Short Line Workshop; opportunity knocks. Railway Age Editor-in-chief Bill Vantuono pulls no punches in his scathing review of the political changes at New Jersey Transit; why short lines should care.
Week ending March 2
Many Sayings from Warren Buffett. BNSF reported full year 2017 results (quarterlies omitted) in both the Berkshire Hathaway 10-K and in the BNSF 10-K; full-year revenue units up 5.3 percent, full-year freight revenues $20.4 billion, up 7.8 percent. RPU gained 2.4 percent to $1,986. Southwest Association of Rail Shippers touches on cross-border moves in and out of Mexico; refinery infrastructure lags while demand for refined products out of the gulf coast is strong. Trains magazine shortline issue (April) features 6 independent properties; 5 of 6 the six connect with UP, BNSF, or both -- table with SL commodities and relative importance to the respective Class Is.
Week ending February 23
Upcoming meetings and what I expect from each: CSX, ASLRRA National, NEARS, NS. A quandary: How to make shorter-haul, higher-rated commodity moves attractive to customers. Coping with shipper preference largely for small volumes to multiple destinations with the carload model. Why watching railroad freight car makers' results can yield clues on where the railroad freight trends are headed.
Week ending February 16
GWR world-wide reports $572 mm Q4 consolidated revenues, up 11% , of which North America contributed 56%, down from 62% a year ago; North America total freight revenue $242 mm, up 4%, on just under 400,000 units, down 2%. The importance of creating customers; why short lines succeed. Ron Batory finally confirmed as head of FRA.
Week ending February 9
Stifel & Co. says new truck orders are posting record highs, GE exits the new loco biz, and railroad car builders aren't exactly turning orders away; Cowen shipper survey shows slowing rates of rail usage and rates going up anyway. CSX "core system" map; how to use it. HappyOrNot customer satisfaction button; how would it work in the RR environment?
Week ending February 2
BNSF first view of 4Q vols from the AAR Week 52 report; total 2.6 million revenue units, up 4%, IP and ag products combined carloads up 7%. Question: Is Precision Railroading done for on CN? Answer; Not hardly and here's why. Hunter's plan lives on at CSX; looking at the map for clues for what's next. How would-be acquirers can stay ahead of the game. Market basket of railroad shares scores well for 2017.
Week ending January 26
WSJ reports oil companies have a backlog of almost 7,000 wells that have been drilled but not fracked; among smaller operators, where the short lines do a lot of business, spending is expected to rise about eight percent in 2018. Canadian National Q4 freight revenue increases two percent to C$3.1 billion on seven percent more revenue units against a four percent drop in system RPU. Norfolk Southern Q4 total revenue up seven percent, ops income up 13 percent; unveils new pricing process that can be run from an iPhone. Union Pacific Q4 total revenue increases five percent to $5.4 billion on 2.2 million revenue units, up a point, helped by a four percent gain for system RPU; operating income before the tax benefit increases four percent.
Week ending January 19
The tax bill complicates matters as the railroads are taking the credit as a benefit in the income tax line on the income statement. I try to back that out to get a better view of how the railroad is actually performing. CSX was first up with revenue down six percent to $2.9 billion, revenue units decline eight percent to 1.6 million; operating ratio improves two points to 64.8. Canadian Pacific reports total Q4 revenue of C$1.7 billion, up five percent, on 679,000 revenue units, up five percent; operating expense increases four percent, generating a five percent ops income gain and an OR of 56.0, down 16 basis points. Kansas City Southern Q4 revenue increases ten percent to $660 million on 585,600 revenue units, up six percent; operating expense increases nine percent, propelling ops income to $237,800 — up 13%; the OR dropped 77 basis points to 64.0.
Week ending January 12
The Q4 Earnings season is upon us -- Week 52 year-to-date revenue unit counts are posted to each railroad's web site; I want to start with CSX inasmuch as the changes there have raised many questions. Louisiana law firm Kahn Swick & Foti launches an investigation into whether CSX's officers and/or directors "breached their fiduciary duties to CSX shareholders or otherwise violated state or federal laws" in hiring Hunter Harrison. Continuing last week's thread on cash flow, share buy-backs, and pricing. Metals commodity group rings up a 6.2 percent gain year-over-year in AAR U.S. carloads year-to-date through December 30.
Week ending January 5
Week 51 AAR Class I total revenue units for North America increased to 36 million from 34 million a year ago, up 5%; merchandise carloads 12 million, up 4% year-over-year. Traffic charts to help you identify who's moving what and your best chances for success with new business leads. Why the most popular railroad commodities are those that are fungible; why consumer staples and discretionary items are better suited to the truckload sector. Why Class I market makers prefer high RVC multiples.