Blanchard Railroad Week in Review, Fourth Quarter 2021

The Railroad Week in Review:
Fourth Quarter 2021

[no Week in Review December 30]

Week ending December 24
R. J. Corman Memphis Line wins Railway Age Short Line of the Year award; Lake State Railway wins Regional RR of the year; Honorable Mentions to Grenada Railroad and Belpre Industrial Parkersburg Railroad. Reader feedback on Shortlines’ winning ways. Watco gets former Wisconsin Central properties.

Week ending December 17
Update on what WIR is and is not; what to expect on 2022. US revenue units are trending down and share buybacks are trending up — any relationship? Alan Shaw responds to STB service inquiry; what to look for in 2022 based on his most recent analyst presentation.

Week ending December 10
Some cautionary words about inflation. Why Norfolk Southern promoting Alan Shaw to President and CEO is an excellent move. RIP Dick Hasselman,

Week ending December 3
RailTrends on what the railroads CAN BE for customers as opposed to repeating the same mistakes for years. The CP-KCS merger now has the blessings of the STB. RailUSA properties sold to Macquarie Asset Management. Hail and farewell: Shaw to succeed Squires at NS; CSX loses Mark Wallace to cancer.

[No Week in Review November 26 -- Thanksgiving Weekend]

Week ending November 19
Shortline and regional railroad merchandise carloads (total units less coal, auto, intermodal) for September, 2021, increased ten percent; AAR merchandise units increased only four percent. Non-Class I September commodities; AAR comps. Rio Grande Pacific Tech is teams up with Cedar AI for advanced transportation management systems. Home Depot, Loews report strong quarters; RRs can benefit with increased tonnage of building materials and other discretionary items for the home where they are reliable and cost-effective. Metals market summary.

Week ending November 12
BNSF third quarter revenue increased 12 percent year-over-year to $5.8 billion as freight revenues increased ten percent to $5.4 billion, led by double-digit gains in the industrial, coal, and consumer products groups. Norfolk Southern took the honors in four of the six operating metrics I follow for the Big Six Class Is. Canadian National is buying a Wabtec “FLXdrive” battery-electric locomotive for use on the Bessemer & Lake Erie in Pennsylvania. How disruptive technology can change the commodity carload model — a biggie that springs first to mind is housing, particularly with respect to dimensional lumber, plywood panels, and sheet rock.

Week ending November 5
NS gets safety warning from FRA: cites T&E injuries and demands copy of new "conductor certification program.” Knowing where the economy is likely headed — table of S&P performance by commodity past and projected. Comments on CP’s Oct 29 Application for control of KCS; emphasizes “single system” operation and benefits accruing to costumers.

Week ending October 29
NS total revenue increased 14 percent to $2.9 billion; revenue units were unchanged at 1.8 million, operations slide. Expect to see crude oil prices continue their upward trend; sample Class I fuel prices paid. Encouraging signs for more carloads of frac sand, coal, fertilizer. Anacostia Rail Holdings appoints Advisory Board of four established RR pros.

Week ending October 22
Five of the seven NA Class Is reporting Q3 earnings checked in this week. I listened to all the calls, downloaded all the slides and financials, and ran the comps. I'd say jobs well done across the board. In order of presentation…
*** KCS total revenue was $744 mm, up 13%, on 560,400 revenue units, down 3%; merchandise carloads increased half a point to 267,800.
*** CN total revenue increased 5% to C$3.6 bn on 1.4 mm revenue units, off a point; merch carloads dipped a point to 669,000.
*** CP total revenue increased 4% to C$1.9 bn; rev units up a point to 665,000; operating income slipped 60 basis points to C$774 mm and the operating ratio added two points to a still-respectable 60.1.
*** CSX freight revenue was $2.9 bn, up 12%, on 1.6 mm revenue units, up 3%; RPU increased 9% to $1,823.
*** UP revenue increased 12% to $5.6 bn on flat volumes; operating income was $2.4 bn, up 20%, as ops expense was held to a 9% gain.

Week ending October 15
Third quarter results will be revealed over the next two weeks; to set the scene I ran some comps of the Big Four US Class Is — see table. Comparing reported US Class I average revenue per unit increases over five years. Why global efforts to curtail oil consumption in the name of climate change are actually increasing oil prices; can railroads leverage their inherent fuel cost advantages? How the global supply chain problems we’ve been reading about may be easing.

Week ending October 8
The industries that are most apt to use the Class I railroads have yet to regain their 2017 volumes of output per the AAR; non-Class s to the rescue? Coal continues to represent roughly seven percent of all short line revenue units; why I see a distinct opportunity for that to increase in the not too distant future. Coal price chart.

Week ending October 1
Cass truckload spot pricing and implications for railroads. AAR industrial production exhibit. A reader builds on the Wayne Gretzky thread. Railroads spurn coal revenue; why it’s ethically wrong and incredibly short-sighted.

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Laura Blanchard, lblanchard@rblanchard.com