Blanchard Railroad Week in Review, Second Quarter 2018

The Railroad Week in Review:
Second Quarter 2018

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

Week ending June 29
Why watching commodity and sector ETFs price trends can provide a marketing edge; these trends can give one a clue about the general direction of specific industries that comprise the railroad commodities list. Why there's a shortage of truck capacity and how you can leverage it into increased carloads. NYS&W restores service on its 45-mile line between Utica and Birmingham after 12 years of being idle; how maintaining a strong local presence with government entities helped get nearly $5 mm in government money toward funding the project.

Week ending June 22
Every quarter after the earnings season is over and has been fully digested, I find it helpful to parse the balance sheets and cash flow statements to determine the relative financial strength of the six Class Is plus GWR; see the table on page 2 for each railroad's scores. Tracking the Class Is' year-over-year revenue unit trends by commodity with simple time/volume graphs; measuring the upward slopes to find the strongest commodities.

Week ending June 15
This week's WSJ feature about there being "a leak in the CSX car pool" is old news; the process actually started a year ago as CSX began to link more tightly the asset base to the demand base. AAR May carloads ex-coal and intermodal increased 3.9 percent year-over year -- the fourth straight month of increasing YOY gains; crushed stone the big year-to-date winner, up 8.7%. CSX has put a six-pack of line segments up for bid; having a single buyer for all six is preferred, though will consider compelling bids for individual lines. GWR May 2018 revenue units increased 14.2% year-over-year; total revenue units year-to-date up 4.3%.

[No Week in Review June 8]

Week ending June 1
Norfolk Southern hosts its 17th annual shortline meeting in Norfolk May 21-22; a highly effective session because all presenters zeroed in on what's essential for short lines' continuing success as logistical partners. Pan Am Rail has authorized a one-time $1,100 bonus for every employee of the railroad and its subsidiary companies, effective immediately. Canadian Pacific dodges what could have been an ugly strike; more than 100 short lines and regional railroads doing business with CP are relieved.

Week ending May 25
A blockchain primer; what the customer sees from truckers but not the railroads. AAR carloads for Week 19 increased 3.2 percent to 14.2 million units, table; Railinc April short line suggests short lines are increasing merch carloads faster than Class I railroads, table. OmniTRAX Energy Solutions (OES) division reopens three proppant silos at its Cotulla, Texas, terminal; serves the Eagle Ford basin, with enough storage space to take 240 cars at 100 tons each. GWR to shut down Huron Central Railway (HCRY) by end of this year; cites high operating costs and low commodity prices.

Week ending May 18
Why short lines must stay abreast of customers' financial health, especially regarding debt; how Class I performance can make or break a short line-customer relationship. Class Is hold forth at Bank America Merrill Lynch Transports conference; news on operating performance and merchandise carload outlook encouraging.

Week ending May 11
BNSF total freight revenue increases seven percent to $5.3 billion on 2.6 million revenue units, up five percent as RPU gained two points; Industrial Products vols increase in all but two of 19 commodity groups. OmniTRAX is the first short line to join the Blockchain Alliance (BiTA, WIR May 4); why active and workable ISAs are critical. I take a ride on the Delaware-Lackawanna Railroad 25th Anniversary office car trip; how proximity to Northeast Corridor markets without that area's congestion adds value to the franchise.

Week ending May 4
Genesee & Wyoming finished its first quarter 2018 with consolidated revenues of $575 million world wide, up 11 percent; North America freight revenue was $245 million, up three percent even, on 406,013 revenue units, up 0.7 percent. Canadian National to buy 350 Plate F, 73-foot center-beam cars to meet rising US lumber demand. KCS and Railinc have joined the Blockchain in Transport Alliance (BiTA), essentially a Big Data warehouse that includes a a futures market for transportation services. Shortline benefits to follow.

Week ending April 27
A full load today: First quarter report summaries from CP, KCS, CN, NS, UP. Note that in every case I've attempted to provide shortline take-aways, most particularly how to use the numbers presented as a guide to finding new business opportunities for each Class I connection. Moreover, you'll get a sense of how the railroad is running and why certain operational changes are being made. Short lines can key in on these as well for ideas regarding the interchange process and having an effect on what happens to their customers' cars beyond.

Week ending April 20
The first quarter 2018 earnings call was not the finest hour for CSX; Foote on changing customer behavior to achieve greater network fluidity. NEARS in Newport a winner; how Watco creates end-to-end customer solutions. Maine short lines and their customers win $1.5 million in development assistance from state program. Responding to last week's WIR screed about Class I railroad pricing practices, a reader recently retired from a Class I writes.

Week ending April 13
Matt Rose at ASLRRA Annual: Shortline growth with BNSF; Merch carload here to stay; Amazon a supply chain game-changer; Operating Ratio not the be all and end all; how truck size and weights tilt the playing field in their own favor. ASLRRA Meeting highlights; breakout sessions invaluable. OmniTRAX gets two CSX Lines. Reading & Northern wins marketing award for coal initiative with NS.

Week ending April 6
Prices for RR shares vs. RR volume growth prospects. NS' Jim Squires lists Q1 service lapses in response to STB Service Outlook request, offers specifics for fixing; seems to me many of these self-same fixes were baked into the highly-touted Thoroughbred Operating Plan 20 years ago. CSAO and SRNJ file w the STB for the latter to assume ops on 10-mile light-density branch. Trump tariff tantrums could mean soybean exports take big hit; BNSF biggest railroad bean carrier by far.

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Roy Blanchard, rblanchard@rblanchard.com
Laura Blanchard, lblanchard@rblanchard.com