Blanchard Railroad Week in Review, Third Quarter 2006

The Railroad Week in Review:
Third Quarter 2006

Current Issues

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Week in Review, 7/7/2006
Rail industry implications of this week's stock market downturn. How shortlines can profit. Two reasons why "same store" sales may be misleading. Leadership shifts among the Class Is. CSX earnings preview. Observations on a proposed ethanol plant on DME.
Week in Review, 7/14/2006
AAR revenue units for Week 27 and YTD. RailConnect Shortline revenue units for Week 26 and YTD. Ditto for RRA in June. Some observations on Class I pricing power and how it can hurt not only shortlines but themselves as well. To get even event reporting from shortlines some Class Is need to set a better example. Another threat to re-regulate by repealing anti-trust exemptions. More on ethanol. GWR General Counsel decamps for a hedge fund.
Week in Review, 7/21/2006
CSX hits a home run; why managing for maximum yield benefits shareholders, shippers and shortlines. Union Pacific sets records in revenues, operating income, operating ratio as the Unified Plan and shifts in leadership take hold. Canadian National perpetuates the theme of precision railroading producing powerful financial returns.John Gallagher reports on a shortline survey in Traffic World and I rebut. GWR June revenue units up on AUS results; sorting out NA from the consolidated figures may get interesting. TRN to exit European ops and not a moment too soon IMHO.
Week in Review, 7/28/2006
BNSF once again shows how shareholder value increases with the power and leverage attained in higher revenues, reining in ops expense and buying back shares. CP increased quarterly sales to $C1.1 bn yoy, up 2.3%; absent the effects of volume, mix and foreign exchange they would have been up 8%.
Week in Review, 8/4/2006
GWR ops income for 2Q06 increased 2.0% to $16.3 mm, compared with $16.0 mm in the second quarter of 2005. The operating ratio after ARG transaction-related expenses was 82.3. Same store NA revenue units dropped 6%, however SS sales went up 5% and RPU up 6%. Why allowance-based shortlines may be in for a tough time in this environment. The common thread through all the Q2 earnings calls. Thoughts on why rail stocks continued to trade down even as the results are pretty good for a slowing economy. Thenel and Heilig promoted at NS.
Week in Review, 8/11/2006
KCS and FEC report improved 2Q results. STB tackles fuel surcharges. Shortline tidbits. Company-specific and general Wall Street comment on 2Q06 earnings reports and trends.
Week in Review, 8/18/2006
UP's Jim Young featured in Smart Money interview; sees velocity and value key to improved results. P&W reports Q2 sales and earnings. Some caveats. Bear Stearns on "positioning the transports for a slower economy." JP Morgan summarizes Week 32 rail traffic. Notes from the ASLRRA/ACE ethanol conference. Larry Kaufman continues the rail stock price thread. Minnesotans support DM&E rail project by a margin of seven to one.
Week in Review, 8/25/2006
Why these may be tough times for shortliners; some thoughts on a way to build the revenue base. Auto sales as an economic indicator. GWR, RRA July car counts. Mayo Clinic disapproves of DME survey results, does its own.
JPM's Tom Wadewitz weighs in. John Cockle's review of the ethanol conference. Technical indicators that rail stocks may finally have hit bottom.
Week in Review, 9/1/2006
It's beginning to look like rail stocks have hit their lows as all the Class Is plus RRA and GWR were up even as the DJIA was down a crumb. Excerpts from a USB economic report. Comments and a values table relating to how I make buy and sell decisions using a combination of company fundamentals and technical indicators.What Amtrak Monthly Performance reports and AAR Train Speed have in common. Amtrak gets a new prez. GWR gets two more shortlines.AAR and shortline carloads for Week 31.
Week in Review, 9/8/2006
NS finalizes $95 mm funding agreement for the Heartland Corridor rail double-stack clearance project. You want Mayo on that? Further twists on DME project. Week 33 shortline carloads; class I comps and themes. The rails’ cyclical headwinds continue to blow. Coal gets little or no respect from Wall Street. Posner et al bring steam back to the Rock.
Week in Review, 9/15/2006
Why the carload business is more likely than intermodal to survive a consumer downturn. Two commodity groups drag down the whole in the RMI shortline car count for Week 34. Common themes between GWR and RRA August 2006 carload counts. Three key points about NS trends and outlook in Q&A excerpts from the Q2 earnings call. Larry Kaufman on why railroads need to get the word out to a broader audience.
Week in Review, 9/22/2006
Excerpts from Charles Marshall's remarks before the Transportation Clubs
International gathering: what's wrong with the single-car merchandise
model; market share opportunities; data management; some suggestions. Notes
from my recent visit to a 343-mile regional railroad that is the
manifestation of a number of Best Practices.
Week in Review, 9/29/2006
How to spot the difference between a broken stock and a broken company. Observations made while riding on the Annual UP Shortline Special from Denver to Omaha. Jack Koraleski's letter to customers provides pointers on site selection. CSX "2005 Corporate Profile" now available; merch carload outlook by commodity very helpful. Why FEC is the next railroad on my buy list.

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Roy Blanchard.215-913-7740 mobile, royblan@icloud.com
Laura Blanchard, email preferred lblanchard@rblanchard.com