Blanchard Railroad Week in Review, Third Quarter 2024

The Railroad Week in Review:
Third Quarter 2024

Week ending September 27
Linking the ISM and business cycle outlook curves to railroad revenue units; turning the corner in 1H2025. UP on creating sticky customers; system map with customer construction projects. Oliver Wyman STB presentation slide showing deteriorating trajectories for rail market share to 2050; customer testimonies shows why.

Week ending September 20
Last week I was dreadfully wrong about Class I shortline meetings — Chuck Baker to the rescue. Homebuilder activity as an indicator of building materials volumes on the railroads. STB gets an earful from the biofuels industry about the harm poor rail service can inflict; rails missing $millions in new revenue.

Week ending September 13
NS fires CEO Alan Shaw and Chief Legal Officer Nabanita Nag; CFO Mark George tapped as CEO, NSC shares fall 4% today. Gene Blabey of the LAL, one of first group of Short Line Hall of Fame inductees, passes. UP, alone among Class Is, has re-started its shortline meetings. BNSF launches Shortline Select program; Genesee & Wyoming's Alabama & Gulf Coast Railway (AGR) named as first participant.

Week ending September 6
Non-Class I railroads growing manifest carloads at a quicker pace than Class Is. Why I think that is so. Examples.

Week ending August 30
Last week we looked at traffic charts reflecting the recent past; this week charts look out 6-12 months. ISM or NFIB? How the IYT Dow Jones Transportation Average and NIFB charts track each other.

Week ending August 23
Today, a little chart-watching. Drilling down from everything moving on every Class I railroad to specific commodities on specific railroads. Charts courtesy Drew Robertson of ASI-Transmatch. He's been doing these as long as I have doing WIR and he gives us fresh insights every week. These charts are particularly useful for non-Class I roads seeking to understand and anticipate customer carload volumes and commodities.

Week ending August 16
The first order of business for any company's management is to protect the interest of the company's owners, and that is best done by keeping the company competitive and devoted to creating and keeping customers. Railroad operations on CN and CP could cease August 22 absent any agreement between CPKC and CN and their respective unionized work forces.

Week ending August 9
BNSF reports $5.6 billion in freight revenues for 2Q2024, up just 40 basis points, on 2.3 million revenue units, up 4.2%;"Consumer Products" (auto and intermodal) dominate the revenue unit count at 57% of the total. Marmon UTLX pari of Berkshire. CSX in 2Q2024 posted freight revenues of $3.4 billion, up 1.2%, on 1.6 million revenue units, up 2.1%; CSX holds its own in a down market and presents a positive path forward.

Week ending August 2
CPKC posts a stellar quarter showing what the combined property can do for customers, employees, and investors while mourning the loss of Pat Ottensmeyer, 67. Further comments and observations on the business cycle and inflation; how they can affect railroad revenue unit volumes. BNSF reports tomorrow and CSX next week.

Week ending July 26
Encouraging words from CN, UP, and NS on earnings calls. Business cycle emerging from a trough. Expect to see increased industrial output over the next few months. CN handled 1.4 million revenue units, up 3.7 percent, and freight revenue was up 6.7 percent, helped by a 2.9 percent increase in RPU; RPU decreases due to lower fuel surcharges and an increased average length of haul. UP freight revenues increase a point to $5.6 billion even though year-over-year revenue units of two million was unchanged; reduced share buyback program lets free cash flow after dividends and share repos turn positive for a change. NS beginning to look like a serious turnaround story with all the metrics heading in the right direction; freight revenue $3 billion, up two percent, on 1.7 million revenue units, up five percent.

Week ending July 19
Anacostia's Pacific Harbor Lines (PHL) and BLET ratify 3-year extension to their current collective bargaining agreement; 90% of eligible BLET members cast favorable votes. Further indications that earnings announcements may affect share prices; UP and CP examples. Robert Primus to succeed Marty Oberman as head of the STB; tells labor leaders, "Thank you for letting me represent you."

Week ending July 12
The FRA denial of BNSF's waiver request cited here last week gets further explanation; 49CFR cited, Court approves request saying, "The statutory text is clear. Applying the wrong statutory standard renders the FRA's rationale arbitrary and capricious." Railroad revenue unit counts have been essentially unchanged for three years; chart summarizes rail traffic for all North American railroads by key commodity groups through 2024 Week 27.

Week ending July 5
Why I continue to suspect that some Class I CFOs are playing financial games to make the numbers look good; a potential fudge factor. Is the FRA now a wholly-owned subsidiary of Railway Labor?

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