Posts Tagged ‘Class 1 railroads’

Winter Weather Depressed Freight Traffic

February 23, 2019

A blast of severe winter was instrumental in depressing North American rail freight traffic executives of three Class 1 railroads said this week at an investor conference.

The Association of American Railroads said that in mid February Class 1 railroads were handling 3 percent less traffic compared with the same period in 2018.

However, executives with Canadian National, Canadian Pacific, Norfolk Southern and CSX said during the conference that they expect traffic to recover and grow this year.

The worst of the weather hit during February and CSX CEO James Foote said that his railroad has seen strong volumes until it hit.

“It’s been a tough winter this year, much tougher than last year,” Foote said. “It’s just been consistent across the northern half of our network.”

NS Chief Financial Officer Cindy Earhart said traffic sagged during the worst of the weather but overall has been on the rise this year.


NS, UP, CP Release 4th Quarter Financial Results

January 28, 2019

Norfolk Southern, Union Pacific and Canadian Pacific all reported positive financial results in the fourth quarter of 2018 when compared with the same period of 2017.

NS said its 2018 fourth quarter income from operations was $1.1 billion, an increase of 27 percent compared with the same period in 2017 and up 9 percent on an adjusted basis.

Net income rose 44 percent to $702 million, earnings per share increased 52 percent to $2.57, revenue climbed 9 percent to $2.9 billion, volume increased 3 percent to 1.98 million units, railway operating expenses increased 9 percent to $1.8 billion and the operating ratio improved 5.5 points to 62.8.

The adjusted fourth quarter results reflect the remeasurement effects of net deferred tax liabilities resulting from the Tax Cuts and Jobs Act of 2017, which affected net income and diluted earnings per share in a year-over-year comparison, NS officials said in a news release.

Intermodal revenue climbed 13 percent to a record $755 million and volume rose 5 percent to a record 1.1 million units; merchandise revenue grew 7 percent to nearly $1.7 billion and volume was flat at 611,700 units; and coal revenue increased 7 percent to $457 million and volume inched up 1 percent to 255,000 units.

For all of 2018 NS reported railway operating revenue of $11.5 billion, up 9 percent compared with 2017. Intermodal and merchandise revenue set records at $2.9 billion (up 18 percent) and $6.7 billion (up 6 percent), respectively.

2018 income from railway operations jumped 17 percent to a record $3.9 billion, net income leaped 39 percent to $2.7 billion, railway operating expenses rose 4 percent to $7.5 billion, volume increased 4 percent to 7.9 million units and the operating ratio improved 2.7 points to an annual record 65.4.

At Union Pacific, the fourth quarter net income was $1.6 billion while diluted earnings per share were $2.12, an increase of 29 percent and 39 percent, respectively, compared with adjusted results for fourth quarter of 2017.

Reported results include previously disclosed adjustments reflecting the impact of corporate tax reform. Including those items, fourth-quarter net income totaled $7.3 billion, or $9.25 per diluted share.

UP said in a news release that on a year-over-year basis, fourth quarter operating revenue rose 6 percent to $5.7 billion, freight revenue grew 6 percent to $5.4 billion, operating income climbed 9 percent to $2.2 billion, operating expenses increased 4 percent to $3.5 billion, carloads rose 4 percent to 2.2 million units and the operating ratio improved 1.1 points to 61.6.

Revenue generated by premium business — which includes domestic and international intermodal, and finished vehicles — jumped 15 percent to $1.7 billion, with volume up 9 percent to 1.1 million units. International intermodal revenue ballooned 21 percent to $446.7 million while domestic intermodal revenue rose 3 percent to $561.7 million.

Industrial products revenue climbed 10 percent to $1.4 billion and volume increased 6 percent to 431,000 units — driven by strong construction materials and metals business — and agricultural products revenue rose 5 percent to $1.1 billion even though volume dipped 2 percent to 275,000 units.

Energy revenue declined 8 percent to $1.1 billion and volume fell 9 percent to 404,000 units due to a 47 percent plunge in sand business associated with more local sourcing and a 6 percent decrease in coal business.

During 2018, UP’s operating revenue grew 7 percent to $22.8 billion, operating income climbed 8 percent to $8.5 billion, net income soared 29 percent to $6 billion, operating expenses rose 7 percent to $14.3 billion, volume increased 4 percent to 8.9 million units and operating ratio ratcheted down 0.1 points to 62.7 compared with 2017 figures.

Canadian Pacific said it posted record operating income of CA$874 million for the fourth quarter, a 28 percent increase compared with the same period in 2017.
CP’s revenue for the quarter rose 17 percent to CA$2 billion from CA$1.7 billion a year ago.

Quarterly diluted earnings per share fell 43 percent to $3.83 from $6.77 a year ago. However, adjusted diluted EPS rose 41 percent to a new quarterly record of $4.55 from $3.22 in 2017 CP said in a news release.

CP’s operating ratio improved by 370 basis points to 56.5 percent while total operating expenses increased to CA$1.13 billion from CA$1 billion in Q4 2017.

CP reports its financial results in Canadian dollars, except for share and per share data.

For 2018, CP’s revenue rose 12 percent to CA$7.3 billion from CA$6.6 billion in 2017; operating ratio improved to a record 61.3 percent; and diluted EPS fell 17 percent to $13.61 from $16.44, while adjusted diluted EPS rose 27 percent to $14.51 from $11.39.

Total operating expenses for full-year 2018 rose to CA$4.5 billion compared with CA$4 billion in 2017.

PTC in Place on Most Class 1 Routes

January 28, 2019

U.S. Class 1 railroads are now using positive train control on the vast majority of their routes, the Association of American Railroads said last week.

AAR said that at the end of 2018 the Class 1s had 83.2 percent of required route miles operating with PTC.

In a news release, AAR said the Class Is have equipped all locomotives, installed all wayside units and radio towers, trained all affected employees and acquired all radio spectrum needed for PTC operations.

Railroads that have done that will qualify for an additional 24 months of time via a waiver from the Federal Railroad Administration to test their systems and ensure interoperability.

AAR said all Class needed to complete testing and have PTC systems fully implemented across their networks.

The news release said Class 1 railroads have invested $10.5 billion in the development, installation and implementation of PTC, and had systems in operation across 44,695 miles of their required 53,732 miles of track.

NS to Relocate HQ to Atlanta

December 13, 2018

Norfolk Southern will relocate its corporate headquarters to Atlanta from Norfolk, Virginia.

The Class 1 carrier earlier this year opened a new operations center in Atlanta from which all nine of its divisions are dispatched.

NS plans to build a $575 million headquarter complex that will be paid for in part by a $600 million dollar bond issue.

It said it is negotiating with Cousins Properties to purchase a site at 650 West Peachtree St. NW, where it will build the 750,000-square-foot headquarters in Midtown Atlanta.

Cousins will manage development of the site about which NS said more information will be released early next year.

Class 1 Freight Traffic Fell Slightly in November

December 6, 2018

U.S. Class 1 railroads saw their traffic growth moderate in November, which led the the Association of American Railroads to say that despite gains in intermodal traffic, the industry is facing an uncertain environment in 2019.

For the month carload traffic was 1,032,067 carloads, down 0.2 percent when compared to November 2017. Containers and trailers originated were 1,100,815 containers and trailers, up 2.5 percent from the same month in 2017.

Combined U.S. carload and intermodal originations were 2,132,882, up 1.2 percent.

Nine of the 20 carload commodity categories tracked by the AAR posted gains from a year ago topped by petroleum, 29 percent; miscellaneous carloads, 13.7 percent, and primary metal products, 7.9 percent.

Weaker from a year ago were crushed stone, sand and gravel, 12.8 percent; motor vehicles, 5.5 percent, and coal, 0.8 percent.

“Rail traffic was not as strong in November as in other recent months. Total carloads fell for the first time in nine months, in part because of lower carloads of frac sand, while intermodal grew only modestly,” said AAR Senior Vice President John T. Gray. “November might just be a temporary correction as rail customers rebalance inventories. However, it would be prudent to keep an eye on forward-looking economic indicators. It’s much too soon to sound an economic alarm, but there is uncertainty, especially regarding trade policy, that is causing volatility in markets railroads serve.”

Excluding coal, carloads gained 0.1 percent. Excluding coal and grain, carloads were up 0.4 percent.

Total U.S. traffic for the first 11 months of 2018 was 12,618,663 carloads, up 1.7 percent, and 13,376,733 intermodal units, up 5.5 percent, from 2017.

Total combined U.S. traffic for the first 48 weeks of 2018 was 25,995,396 carloads and intermodal units, an increase of 3.6 percent.

CEOs Differ on Merger Benefits

December 5, 2018

Two Class 1 railroad CEOs last week gave differing views about the prospect of railroad mergers in the future.

Union Pacific CEO Lance Fritz said he views the regulatory risks and obstacles to a Class I merger outweighing any benefits that might accrue from a consolidation.

On the other hand, CSX CEO James Foote said he wants to keep on open mind about mergers.
Fritz explained that he doesn’t see much opportunity in a merger.

Although he said there could be saving from cutting administrative costs and eliminating interchanges and the risk is that the conditions imposed during the regulatory review process might overwhelm those.

He pointed to tougher merger rules that the Surface Transportation Board promulgated in 2001.

Foote, though pointed to how previous mergers resulted in lower costs and improved service. Any future mergers could be expected to delivered similar benefits.

Foote concurred with Fritz that the success of a merger would hinge on whether it still created values once the regulatory review process is completed.

Is a CSX-CP Combination Coming?

November 26, 2018

Wall Street things that CSX and Canadian Pacific are the two most likely Class 1 railroads to seek a merger, even if doesn’t likely to occur in 2019.

A research note issued by Wolfe Research noted that hedge fund TCI is now the second largest shareholder in CP as well as a holder of shares in three other railroads.

CP CEO Keith Creel has expressed support for mergers and with a Republican in the White House the climate for mergers may be more favorable.

However, Wolfe acknowledged that winning support of the U.S. Transportation Board might be a tall order, particularly trade tensions between the United States and Canada might make Canadian regulators loath to approve a merger.

Independent consultant Anthony B. Hatch of ABH Consulting takes issues with the Wolfe report, saying that although TCI – also known as The Children’s Investment Fund – sought to control CSX a decade ago, it did not prod CSX to seek a merger partner.

Hatch also thinks Republicans are reluctant to seek to choose winners and losers in battles between corporate interests

Any proposed Class 1 merger would trigger fierce opposition from shippers. Hatch also doubts that there is enough to be gained from a CSX-CP combination.

Amtrak Takes Host Railroads to School

March 26, 2018

Amtrak has launched a quarterly “report card” on its website that evaluates the delays that it incurs on the tracks of its host railroads.  In the first report card, Amtrak said most delays are due to freight trains interference.

The implication is that such delays violate a federal law that gives Amtrak passenger trains preference over freight trains. However, the law has some exceptions.

Amtrak assigned letter grades to six Class 1 railroads that were based on delays per 10,000 train miles.

Amtrak defines that as the number of minutes of host-responsible delay, divided by the number of Amtrak train miles operated over that host railroad, times 10,000.

Canadian Pacific received the only A on the report card. Other railroad grades included a B+ for BNSF, a B- for Union Pacific and a C for CSX. Norfolk Southern and Canadian National both “flunked” by receiving grades of F.

Following are some Amtrak comments regarding hosts railroad performances on specific routes:

• 97 percent of passengers on Hiawatha Service between Chicago and Milwaukee arrived at their destinations on time. Ninety percent of trips experienced no freight train interference.

• 90 percent of passengers on Carl Sandberg/Illinois Zephyr service arrived on time with less than 4 minutes of delay by BNSF freight trains.

• More than 57 percent of passengers arrived late abroad the Coast Starlight. On an average trip on this route, passengers experienced four separate instances of delay caused by UP freight trains, accounting for 48 minutes of delay on average.

• 50 percent of passengers traveling on the Cardinal arrived late by an average of 1 hour and 27 minutes. On 85 percent of trips, the Cardinal’s 350 passengers are delayed by CSX freight trains.

• Over 67 percent of passengers arrived late at their destinations while traveling on the Crescent. The typical Amtrak train, carrying 350 passengers, is delayed over 1 hour and 40 minutes due to NS freight trains. Many Amtrak trains wait as long as 3 hours and 12 minutes for NS freight trains using this route.

• More than 200,000 passengers arrived late at their destinations on the Illini and Saluki, which operate between Chicago and Carbondale, Illinois. Amtrak trains were delayed by CN freight trains on nearly 90 percent of their trips.