Blanchard Railroad Week in Review, Second Quarter 2008

The Railroad Week in Review:
Second Quarter 2008

Current Issues

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Week in Review, 4/4/2008
The outlook for new railcar builds is good or bad depending on who you are. From Baird’s Jon Langenfeld comes a helpful note on trucking volumes. The Spring 2008 BNSF Short Line Newsletter once again zeros in on short line asset utilization. The unit train vs. single carload discussion continues. Why the present passenger push can only be good for the freight rails.
Week in Review, 4/11/2008
The equipment reinvestment thread (WIR 4/4/2008) continues with some highly informative and constructive feedback from Mark Schmidt of BNSF. The CSX/TCI battle takes another twist as TCI accuses the CSX chairman and the board of insider trading in a 62-page federal court filing. Is the bloom coming off the ethanol rose? Who's up and what to watch for during the STB's Common Carrier hearings April 24-25.
Week in Review, 4/18/2008
Two things short lines must do before asking for a rate. Three WSJ tidbits affecting grain-hauling short lines. CSX work in progress continues with sequentially strong results. The forces of darkness and re-regulation; Wadewitz sanguine. GWR carloads down for month and quarter.
Week in Review, 4/25/2008
Canadian National reported first quarter ops income down 7% to C$523 as revenues were relatively stagnant at plus 1% to a C$1.9 bn and expenses were up 4% propelled largely by fuel. Canadian Pacific reported revenues of C$1.1 bn, up 3%, with revenue units up 2% on RPU essentially unchanged yoy.

Comparing CSX, CN and CP on a number of measures. Norfolk Southern first quarter revs hit a record $2.5 bn (do we hear $10 bn for the year??), up 11% yoy, record revenues for ag, chems and coal, all up double-digits with RPU gains in the same range.
Week in Review, 5/2/2008
Union Pacific’s first quarter hat trick came in the form of record revenues, record operating income and record eps. Kansas City Southern in Q1 pushed railroad revenues up nearly 10%, and by holding ops expense to an 8% gain leveraged a 15% ops income gain.
Genesee & Wyoming did not have the best of quarters as ops income dipped 9% yoy to $21 mm and expenses rose more than 17% on a revenue gain of just 12%. BNSF took the top spots among the seven Class Is for percent changes in total revenue, merch carload revenue, system RPU, increase in merch carloads handled.
Week in Review, 5/9/2008
Tuesday's WSJ New Highs and Lows list was particularly instructive for railroads, car builders and investors. A discussion of the present scheme to move railroad accounting to replacement cost. Union Pacific stock will split 2:1 on May 28; how additional share buy-back benefits shareholders. VRS and PAR reopen Hoosick Jct Gateway.
Week in Review, 5/16/2008
Class I retained earnings, market cap and stock valuations; why short lines ought to pay attention. Table. Tony Hatch notes from the ASLRRA Annual. Morgan Stanley crop outlook OK for ISS roads; handling lines may face some challenges. GWR revenue units for April 2008; down 6% YTD. First impressions from Canadian Pacific's “Connections 2008” short line conference. Norfolk Southern and Pan Am Rail agree to create the “Patriot Corridor.”
Week in Review, 5/23/2008
How shortlines can profit quickly from what was said at the recent CP short line meeting. Why not let short lines get a commission for selling container loads for direct dray to the closest Class I intermodal terminal? Proprietary analysis of the four car builders’ 1Q08 results ought to wave a lot of red flags for value investors and does not show a lot financial strength in the sector. Indiana Rail Road buys new power and cars for coal service. STB deems four Class Is "revenue-adequate." Tidbits.
Week in Review, 6/6/2008
How WNYP uses its grant money to good advantage. Further discussion of the merits and applicability of ECP. STB reconsiders paper barriers -- be careful what you ask for.
Week in Review, 6/13/2008
Iowa State Sen. Matt McCoy, Democrat from Des Moines, writes in the Des Moines Register about the dangers HR 2125 pose to the Iowa economy. L.B. Foster orders received during May 2008 were the highest in Company history. US manufacturers repatriating work that had been shipped offshore as transportation costs rise. Patriot Rail adds fifth property. Porter Collins obit.
Week in Review, 6/20/2008
Some details on how the flooding in Iowa and surrounding states has impacted all transport modes, particularly half a dozen or so railroads of all sizes from the UP to the Crandic. Morgan Stanley on what we're likely to see when the waters recede. IAIS buys new power even as the floods hit some of its biggest customers.

UBS and JP Morgan see rails' Q2 earnings less robust. STB Round Two hearings on common carrier obligations set for July 17 -- TIH a particular worry for short lines. Why LB Foster gets a BUY rating from Janney. Ed Wolfe on sale of Weyerhaeuser short line railroads. BNSF guides Q2 down 8%.
Week in Review, 6/27/2008
Though the official count is not in, it looks like TCI got four seats on CSX Board. No management changes contemplated. Legislative unknowns have serious strategic implications to the outcome. Tony Hatch sees "Mutually-Assured Destruction component" to HR-2125. How to add core capacity without building or buying new railroads. Shares of car builders and track suppliers fall. Short line carloads as reported by RMI's RailConnect Index.

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