Blanchard Railroad Week in Review, First Quarter 2021

The Railroad Week in Review:
First Quarter 2021

Week ending March 26
Mergers and acquisitions: CP/KCS and CSX/Pan Am Southern.

Week ending March 19
The way a chairman begins his review of the previous period's results is very revealing; it tells one right up front where the company's focus lies. Vermont Rail System files STB objection to the proposed CSX-PAR combo. There's an argument going around that higher diesel fuel prices will push truck rates up to the point where rail freight is more attractive; I disagree. Steel products carloads on the mend?

Week ending March 12
There's life in the single-carload sector -- BNSF has reported a surge in scrap metal carloads for openers. Getting to YES. Sanity checking the 20 percent number bandied about as the short line/regional railroad portion of total AAR carloads.

Week ending March 5
CSX files with STB to acquire Pan Am Rail in a cash and stock transaction; GWR subsidiary to operate Pan Am Southern. BNSF fourth quarter revenue units 2.6 million, up 2.6 percent, with double-digit jumps in grains and intermodal; merchandise carloads ex-auto essentially unchanged. The sale of the CSX Massena line to CN (WIR 9/6/2019) may not happen after all; the STB in FD 36347 takes offense at the paper barrier language.

Week ending February 26
The ongoing fuel surcharge litigation may yet be resolved in favor of the shipper; court argues that the railroads' CFR 49 argument fails. Fred Ehlers on NS technology update; unlocking the data potential power of PTC. Steel users are scrambling for raw materials; trends and portents for RR carloads. BNSF reports Q4and. 2021 YTD tomorrow. FY rev units were off nearly 8%; Q4 units were up 2%.

Week ending February 19
UP's Precision Train Builder simulation tool can improve competitive position for shortline customers. OmniTRAX short line in Savannah to serve new logistical center. GWR participates in 45 new industrial development projects. BNSF customers invest more than a $billion on new and expanded rail-served sites. Pulpwood business in northern Maine gets new lease on life. Elsewhere, total NA revenue units YTD trailing 2017-2019 averages. CN leads at 4%. UP lags at minus 40 basis points. Color me encouraged.

Week ending February 12
Some thoughts on the rapidly changing price of lumber and the penalties inflected by long transit times; AAR chart. PFL storage report -- tank cars and covered hoppers returning to service fastest. Drilling down into the $99 mm "impairment charge" taken by NS in 3Q2020. Watco/Houston teams up with Crawley on off-shore wind-farm project. As an aside, I suspect that one reason so many cars are going into storage is that as single-carload moves dwindle, resources are being shrunk accordingly to accommodate this new model of RR ops -- more long-distance hook and haul, fewer first mile/last mile way freights. What do YOU think?

Week ending February 5
Norfolk Southern in 2020 won new business from 86 customers in seven states; commodities are all in the merchandise carload sector. RJ Corman Group has tapped former FRA Administrator Ron Batory for its Board of Directors. The California Transportation Commission (CTC) will distribute $6.45 million to seven shortline railroad infrastructure projects; thumbnail of each. CSX gets a "C" or Hold rating on the Schwab Equity Rating scale; why revenue unit CAGR is important.

Week ending January 29
Kansas City Southern reported fourth quarter revenues of $693.4 million, down five percent; revenue units decreased three percent. Canadian National total revenue increased two percent to C$3.7 billion on 1.6 million revenue units, up seven percent; operating income increased four points. Norfolk Southern total revenue for the quarter fell more than four percent to $2.6 billion on 1.8 million revenue units, down 1.2 percent. Canadian Pacific revenue units increased four percent to 727,800 while total revenue slipped three percent to C$2 billion; revenue units increased four percent to 727,800 while total revenue slipped three percent to C$2 billion.

Week ending January 22
Revisiting short lines, regionals, and ISS. UP reports Q4 total revenue of $5.1 billion, down one percent, on 2.1 million revenue units, up three percent. CSX total revenue decreased 2.1 percent to $2.8 billion while revenue units increased 3.9 percent to 1.6 million and system RPU fell 5.6 percent to $1,698. KCS had an admirable Q -- details next week.

Week ending January 15
IMHO Class III railroads are responsible for much of the Class I merchandise carload growth; the Big Six are down 7% for the year while some short lines are reporting banner years. Cowen's Q4 truckload carrier survey is out; railroad marketeers can learn something about the competition from it. The chemicals business that the non-Class I railroads participate in lies mainly in STCC 28, which includes both fertilizers and industrial chemicals; Morningstar reports on both.

Week ending January 8
Week 52 carload reports are in; total NA rev units were down seven percent with only CP and KCS faring slightly better. Share price trends vs railroad financial performance. Rio Grande Pacific unit to lease UP Tennessee Pass line. Why the XLB Materials Sector ETF is important. How Union Pacific installed a new master retarder in Englewood Yard in close to eight hours.

THE BLANCHARD COMPANY
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Roy Blanchard, rblanchard@rblanchard.com
Laura Blanchard, lblanchard@rblanchard.com