Folk Hero

Railroad Weekly July 29, 2024

Inside This Issue

·   Folk Hero: NS Starts Delivering on Promises, Stock Price Jumps

·   Union Terrific: Coal Woes Be Damned, UP Ups Profits  

·   Montreal Stall: A Tough Q2 for CN as Strike Threat Bites

·   Acquisition Permission: CN Awaits STB Decision on Iowa RR Buy

·   Turn Baby Turn: Finally, an Intermodal Revival? Some See Signs.

·   Tier-4 Score: Wabtec Bags Big New Loco Order

·   Firms Just Wanna Have Funds: Canada Cuts Rates Again; When Will U.S. Follow?

·   What Might We See From CPKC? Calgary RR Reports This Week

Track Talk

“We don’t get to roll over and play dead because coal is not where it needs to be. So, the commercial team is out there hustling and getting more business.”

      -Union Pacific marketing chief Kenny Rocker

The Latest

·   Utility coal demand is in freefall. Markets ranging from lumber to steel to rock to grain exports are all weak. So is America’s industrial economy more broadly. Housing construction remains depressed. Railroad labor costs are up. And lower-margin intermodal freight is accounting for a greater share of what railroads are moving. Yet two U.S. rail giants—Union Pacific and Norfolk Southern—both managed to increase revenues and lower their operating costs last quarter, resulting in better operating ratios. Both railroads are becoming more efficient and productive, moving more freight per worker, with fewer locomotives and railcars. They’re able to do so, most importantly, by increasing network velocity. This, furthermore, is helping UP and NS win more business. It helps that the U.S. economy overall continues to grow steadily, underpinned by healthy consumer spending. NS for one has even turned optimistic on the long-ailing domestic intermodal market. That said, new threats are looming, including business concerns in advance of the November presidential election, and strike fears as the east and Gulf coast dockworker contract expires after September. Read on for more about how UP and NS delivered impressive second quarter profits.  

·   Canadian National reported as well, but with less to celebrate. While it managed to grow Q2 revenues, costs ballooned due to operational difficulties on the busy western tracks near Vancouver. Operating ratio thus worsened. CN also lost business amid shipper fears about a Teamsters strike—a strike that might yet happen after August. Like UP and NS, CN is carrying a greater share of lower-margin intermodal freight. And new government labor regulations are causing labor shortages. Still, there’s a lot to like about CN’s prospects for the second half. Canada’s grain harvest looks promising. Markets like energy, chemicals, and autos are performing well. Operations in the west are back to normal. And CN is growing with new customers, new projects, and new acquisitions—it’s hoping for imminent STB approval to buy the Iowa Northern.    

·   Get ready for CPKC’s Q2 earnings report this week. We’ll soon get earnings from