Blanchard Railroad Week in Review, Second Quarter 2019

The Railroad Week in Review:
Second Quarter 2019

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

Week ending June 28
Longer trains and less interim car handling can't be all that good for single-car shipments not moving in unit trains. Paper commodity group is still in a funk -- boxmakers who typically expect to see a seasonal uptick in demand by mid-June have yet to see any signs of a pickup as demand remains sluggish. IORY and Ohio Rail Development Commission get access to nearly $7 mm in funding for upgrading and adding to industrial trackage. A look at the BNSF-O-gauge layout on display at the Berkshire Hathaway Annual meeting.

Week ending June 21
This AAR graph clearly shows the continuing downward trend of railroad revenue units; contrinue the trend line down and see that, at this rate, the railroads will have no customers left by the year 2023 or so. CSX's Foote on reversing tyhe trend; fitting short lines into the trip plan matrix. PMI contracting along with railroad revenue units.

Week ending June 14
North American Rail volume for 2019 through May came in at 14. million units, down 1.4 percent YOY; merch carloads, ex-coal, including automotive, were 5.5 million, down two percent YOY. How CSX defines and uses the AAR Performance Measures. Beware financialization: A look at a sample Class I undergoing significant change to see where those changes were manifesting themselves. Warren Buffett on PSR: There;s been growing evidence from the actions of [the PSR] railroads that we can learn something from what they do.

Week ending June 7

Week ending May 31
Frank Lonegro, CSX Chief Financial Officer, is leaving the company after 19 years; service; a successor has not been named. Change is the short line railroad scene since Staggers -- has the buying and selling of short lines been a financial game and is that game up? The railroads could be risking market losses by charging shippers excessive fees; it is possible PSR railroads are focused on changing customer behavior through aggressive penalties.

Week ending May 24
Notes from the Wolfe Research 12th Annual Global Transportation Conference. Watco: "We never assume we'll get the last look and we always operate on the premise that Crazy is undefeated." GWR: North American M&A market is "very active." KCS: Using the PSR initiative to make service better and more predictable. UP: Key Performance Indicators (KPIs) are all moving in the right direction as the railroad rolls out its Unified Plan 2020. CSX: Wallace sees a "huge opportunity" with short lines. CSX: Wallace sees a “huge opportunity” with short lines. Trend: Weights per shipment are trending down and frequency of shipments is trending up; good for intermodal, not so good for carload.

Week ending May 17
Tariff wars and domestic transportation;US imports from China are 14 percent of ten percent or 1.5 percent of total US Imports. Why I don't pay much attention to the changes in weekly AAR carloads; the rate of change over the past year is essentially zero. GWR revenue units for NOrth America in April increase 2.9 percent vs. 2018. Of the seven commodities comprising 80 percent of total rev units, three were up with double-digit gains.

Week ending May 10

Week ending May 3
Canadian National increases RTMs three percent on essentially unchanged revenue units -- up70 basis points; merchandise vols. including automotive up double that. Genessee & Wyoming report 393,857 first quater revenue units for North America, down three percent; freight revenut increases three percent. Why listening to the Q&A on earnings calls is edifying.

Week ending April 26
Canadian Pacific Q1 revenue units down two percent year-over-year, operating income gains less than a point; while the first quarter had its challenges, the second quarter is off to a very good start. Norfolks Southern makessubstantial strides in strengthening the franchise in the first quarter; service & productivity metrics provideon-time delivery performance in terms of plan adherence.

Week ending April 19
CSX opened the Q1 earnings season with total revenue up 4% to $3.0 billion on 1.5 million revenue units unchanged from a year ago; good news for short lines -- merchandise carloads up 3.1%, revenues up 5.6%, and RPUs up 2.4%. KCS revenue increased 5.7% to $675 million even though revenue slipped 1.4%. UP total revenue $5.4 billion, down 2%, on 2.1 million revenue units, down 2%. The common thrread throughout is how running a scheduled railroad to plan creates a more reliable transportation producet at a lower cost to the provider.

Week ending April 12

Week ending April 5
Canadian National to invest some C$320 million in Ontario this year; entire CN shortline community gains from improved competititve access for their customers'customers in Ontatio. Union Pacific presentation at the recent JP Morgan transportation conference provides vital intelligence for shortlines is everywyere; UP week AAR carloads YTD comps. Railway Age comments on AAR March carloads.

THE BLANCHARD COMPANY
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Roy Blanchard, rblanchard@rblanchard.com
Laura Blanchard, lblanchard@rblanchard.com