“Covid-19 impacts have varied across the supply chain though rail service has been really strong in recent months. Shippers noted the ability to get better pricing if they deliver volumes for Class I carriers. Supply chain near-shoring continues to be an underappreciated story and could benefit KSU if supply chains relocate to Mexico.”
“Railcar inquiries are largely in line with—if not slightly better than—the anemic levels seen two months ago. Translation into orders remains slow. Lease rates are still depressed, with no signs of improvement. Secondary market valuations appear to have eased. Locomotive upgrades could prove resilient. We’re constructive on Wabtec, Trinity and Greenbrier, but the latter two could see near-term pressure.”
OK, I’ll give you one guess as to who said this. Hints: It’s not APTA or the Eno Center for Transportation. It’s not one of the giant public transportation agencies like the New York MTA or NJ Transit or CTA or WMATA or Los Angeles Metro. It’s not one of the huge engineering consulting firms like WSP USA, AECOM or Parsons. It’s not a transit car builder like Alstom, Siemens or Bombardier. It’s not even Contributing Editor David Peter Alan, whose passion for rail transit has generated tens of thousands of words for the Railway Age website. Give up?
“Storing oil in tank cars may be theoretically possible, but logistical, economic and regulatory hurdles make it unviable. Railcar lease rates could be 25-30% below 2019. Manufacturing inquiries have continued, but prospective buyers are in no rush to pull the trigger.” Those are the key takeaways from a conference call moderated by Cowen and Company Freight Transportation Analyst Matt Elkott. Among the industry experts participating were Railroad Financial Corp. President and Railway Age Financial Editor David Nahass, National Steel Car Senior Vice President Marketing and Sales Bob Pickel, and Oliver Wyman Vice President Jason Kuehn.
Reporting on its financial and operating results for the first quarter ended March 31, 2020, CN said it “demonstrated resiliency with solid performance amid month-long illegal blockades and impacts of the COVID-19 pandemic.”
Union Pacific reported an all-time best operating ratio of 59% in 2020’s first quarter, based on net income of $1.5 billion, or $2.15 per diluted share. This compares to $1.4 billion, or $1.93 per diluted share, in first-quarter 2019. “Against the backdrop of the emerging COVID-19 pandemic and a challenging volume environment, we leveraged productivity to deliver strong financial results,” said Chairman, President and CEO Lance Fritz. “We also made substantial improvement in employee safety, which is a testament to our dedicated employees. Our rail network has never run better, providing a safer, more reliable and efficient service product to our customers.”
CSX’s first-quarter 2020 operating ratio set a Class I railroad first-quarter record of 58.7%, improving 80 basis points from 59.5% in the prior year. The railroad achieved this milestone in the face of a drop in revenues, with a corresponding drop in expenses. CSX withdrew its guidance for the remainder of the year.
Cowen and Company Freight Transportation Analyst Matt Elkott estimates that there is readily available tank car storage capacity for at least 25 million barrels of crude, which can be ramped up in the coming weeks. However, the Canadian railroads do not appear to have a strong appetite for this business, while their U.S. counterparts may be examining the prospects.
The results of Cowen and Company’s 1Q20 Rail Equipment and Rail Shipper Surveys, conducted by Managing Director and Railway Age Wall Street Contributing Editor Jason Seidl, with Airfreight and Surface Transportation Analysts Matt Elkott and Adam Kramer, indicate declining railcar order and pricing expectations. Following are summaries:
Citing “increased macroeconomic uncertainty and corporate debt in focus across various sectors,” Cowen and Company recently delved into current debt levels at major railroad and trucking firms, and discussed actions these companies could take to combat the difficult times.