KeyBanc Capital Markets attended the 2016 Rail Equipment Finance Conference, and after numerous presentations from railcar OEMs, lessors, shippers and finance companies, believes that the industry is transitioning to a more “normal” demand level.
According to an analysis conducted by Sandy Fielden of RBN Energy LLC, based on current demand, rail load capacity for crude by rail (CBR) in Western Canada is “vastly overbuilt and underutilized.”
As many readers of the “Financial Edge” know, the end of 2015 saw the purchase of General Electric Railcar Services, one of the largest and in some ways oldest of the operating lessor companies that lease railcars to their customers on primarily shorter (think seven years and less) lease terms.
The American Railway and Engineering Maintenance-of-Way Association (AREMA) Educational Foundation, in cooperation with the US Committee to the Watford Group of International Railway Designers, has created a unique learning opportunity for an aspiring railway employee to gain international perspective of railroad design and operations called the “Watford Fellowship.” The Fellowship will consist of two paid registrations to the 2016 Watford Conference in the Scandinavian region of Europe, valued at approximately $1,400. The four-day conference, targeted for late October, includes presentations by the attendees in all aspects of railway planning and design with an emphasis on buildings, bridge and tunnel structures, and corporate identity.
Canadian Pacific’s fourth-quarter and full-year 2015 financial results were slightly below analyst expectations yet “still solid given the macro challenges,” according to Cowen and Company Managing Director and Railway Age Wall Street Contributing Editor Jason Seidl. “While volumes should decline in 2016, the company guided for double-digit EPS growth. We are modeling for a more conservative mid-single increase. We remain constructive in the long term but note that near-term upside may be limited.”
Following a letter submitted to the U.S. Department of Justice in which Canadian Pacific accused several Class I railroads of joining forces to put a stop to its pursuit of Norfolk Southern, the railroad on Jan. 20, 2016 issued a white paper, “The Opportunity to Alleviate Congestion in Chicago,” arguing that its proposed combination with NS will alleviate congestion in the key rail hub of Chicago, “where gridlock in the winter of 2013-14 hobbled the industry for months and threatened to hinder the U.S. economic recovery.”
In the latest twist in the ongoing saga of Canadian Pacific’s increasingly hostile pursuit of a steadfast Norfolk Southern as a takeover target, CP is accusing several unnamed Class I railroads of joining forces to block the transaction, and prevailed upon its attorneys to submit a letter to the U.S. Department of Justice claiming that such actions are in violation of antitrust laws, illegal and anticompetitive.
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The results from Cowen and Company’s Fourth Quarter 2015 Rail Shipper Survey “continue to show demand weakness, a lack of confidence in the economy and that further truckload rate deterioration may still be catching up to rail pricing,” says Managing Director and Railway Age Wall Street Contributing Editor Jason Seidl. “The results make us somewhat more cautious on the rail sector, but still feel that any material pullbacks in the shares may create unique buying opportunities in Norfolk Southern, CN and Genesee & Wyoming for longer term investors.”
CSX Corporation on Jan. 12, 2016 announced fourth-quarter 2015 net earnings of $466 million, a 5% decline from $491 million in the same period of 2014, or $0.48 per share, down 2% from $0.49 in the prior year.
