Raymond James Financial Services analyst Steven Hansen told clients in a note Thursday that railroad recovery in Canada has reached a state of “reasonable health and vigor,” and he accordingly upgraded earnings estimates for both Canadian National and Canadian Pacific.
He increased his price target for CP to $68 a share from a previous $65 and maintained an “outperform” rating. He increased his target for CN to $67 from $54.50, with a “market perform” rating that reflected an earlier run-up in the price.
“Weekly volumes are not only improving, but also surging to fairly robust levels—in some cases recovering to pre-recession levels,” Hansen said.
He noted that CN carload freight traffic increased 14.6% in the first quarter compared to the 2009 quarter, and CP carloads grew 9.1%.
Both railroads will report their first-quarter earnings late in April.
J.B. Hunt was the first trucker to team up with railroads to promote intermodal service in a big way, and the resulting success story continues to unfold. Another glowing chapter emerged Wednesday.
J.B. Hunt Transport Services Inc. announced first-quarter results that exceeded analysts' expectations with the strongest performance coming from the company’s intermodal segment, where revenue increased 20% to $469 million on a 21% increase in volume.
Given this impetus, J.B Hunt’s net income in the first quarter increased 22% to $37.5 million, or 29 cents a share, from $30.8 million in the same quarter last year. Total operating revenue was $844.7 million, up 17%. Analysts had anticipated revenue of $797.2 million and earnings of 27 cents a share.
J. B. Hunt shares were up 4.3% in early morning trading Thursday.
The company became an intermodal partner of the Santa Fe Railway about 20 years ago, putting its trailers and containers on rail for the long haul and reaping large savings in fuel and driver costs—a strategy that became particularly important in later years when fuel costs soared and driver shortages developed. Intermodal is now the company’s biggest segment.
The Association of American Railroads (AAR) reported Wednesday that carload traffic on U.S. railroads rose 7.55% in March compared with the same month last year, but was down 11.5% from March 2008.
“It is important to note that while we are seeingpositive growth in carloads compared with last year, things are still down from 2008,” said AAR Senior Vice President of Policy and Economics John Gray. “It will take some time for traffic to rebound to where we were in 2006—the best year in history for rail traffic.”
AAR said 16 of the 19 commodity groups saw higher carloads last month compared with the same month last year. U.S. rail intermodal traffic was up 12.1% in March compared with the same month last year, but down 4.5% for the same month in 2008.
On a seasonally adjusted basis, carloads in March were up 3.9% compared with February 2010, while intermodal was up 2.1%.
As for the latest weekly figures ending April 10, AAR said Thursday that U.S. carload traffic rose 16.4% from the comparable week in 2009, with all 19 carload commodity groups showing increases from last year. Volume still trailed 12% below the comparable 2008 period. U.S. intermodal traffic was up 14.2% from last year but down 10.5% from the 2008 week.
Leading the 19 carload commodity groups in gains were: shipments of metals, up 108.6%, metallic ores, up 97.6%, primary forest products, up 54.4%, scrap, up 54%, and motor vehicles, up 35.%%.
Canadian carload traffic rose 31% for the week ending April 10 compared with 2009, and intermodal rose 17.4%. Mexico’s two major railroads reported carload traffic gained 68.7% from the comparable week in 2009, while intermodal rose an even heftier76.2%.
Combined North American rail volume for the first 14 weeks of 2010 on 13 reporting U.S., Canadian, and Mexican railroads rose 6.2% compared with the comparable 14 weeks in 2009. Intermodal rose 9.3% from last year.
Toronto-based Fraser Papers, Inc., a shipper served in Maine by the Montreal, Maine & Atlantic Railway, has hailed the action by the Maine state legislature to identify $57.8 million in bonds, including roughly $10 million to purchase 240 miles of MM&A right-of-way. Such action still requires approval by state voters, who will decide this November whether the expenditure is worthwhile.
But Fraser Papers has taken the issue a step further, suggesting that if Maine itself purchases the route, service should be provided with railway companies bidding on the use of the lines, with possibly more than one provider traversing the route—what’s known in the industry as “open access.”
Fraser Papers identified Canadian National and Saint John, New Brunswick-based regional railroad NB Southern Railway as possible competitors to serve the route. NB Southern Railway also serves Maine and Quebec.
Fraser Papers' Edmundston-Madawaska pulp and paper operation, straddling the Canadian-U.S. border, relies on the rail line to ship the vast majority of its paper.
MM&A, which owns track in Maine, Vermont, Quebec and New Brunswick, sought permission in February to abandon the Maine right-of-way, which runs from Madawaska to Millinocket, Maine.
The Surface Transportation Board announced Wednesday that it will ask MM&A officials and the Maine Department of Transportation to discuss formal mediation efforts in Washington. A hearing has been scheduled for April 22 at STB headquarters.
Said STB: “The
Board believes that a meeting between the State and MMA, facilitated by Board
staff, could be very beneficial in this case. While there is much that
separates these parties, they also share some common interests. The State is
interested in acquiring these lines to protect local industries and
communities, while the railroad wishes to relieve itself of the obligation of
owning and operating these rail lines if abandonment authority is granted. In
these circumstances, the Board believes it is in everyone’s best interest to
explore any and all options that may help preserve this rail corridor as part
of the national rail system. We appreciate that the parties already have been
engaged in lengthy discussions toward that end, and we encourage them to
continue to do so. The Board has mediation resources and staff with extensive
knowledge of its abandonment, discontinuance, and offer of financial assistance
(OFA) procedures that may help the parties reach an agreeable resolution of
some of their issues. A meeting
between the railroad and the State under the auspices of Board staff may thus
offer opportunities for the consideration of procedures that could benefit all
the parties in the case.”
The New York Metropolitan Transportation Authority announced Tuesday a new breakthrough in its search for ways to shrink this year's expected operating budget gap of nearly $800 million. MTA said it had renegotiated contracts with 43 vendors and suppliers, saving $18 million in 2010 and more than $70 million over the life of the contracts.
This news came one week after the MTA said it was saving more than $40 million, without affecting services, by eliminating more than half of the planned projects in its 2010 operating budget.
“Companies in financial distress often go back to vendors and ask them to renegotiate contracts and that's exactly what we're doing here,” MTA Chief Operating Officer Charles Monheim said. “We took a new approach asking our suppliers if they could do better and in many cases, the answer was yes.”
The biggest savings, $15.9 million, came from new contracts with paratransit providers, which Monheim said was possible because of increased competition. Renegotiated contracts with IT vendors, parts, and other suppliers resulted in $2.6 million in savings.
Previously, the MTA identified $49 million in savings through a 15% reduction in administrative payroll.
Press reports said the consulting firm Accenture helped develop the savings strategies.
As for vendors that refuse to renegotiate, The New York Times quoted Manheim as saying: “They will be given all the rights any contractor will receive. But we may be less inclined, where we have discretion, to be favorably disposed to them.”
Electro-Motive Diesel, Inc. (EMD) announced that it has established multiple warehouse operations in China to support a growing fleet of 6,000-horsepower diesel locomotives. EMD won a contract in September 2005 to supply 300 locomotives to the China Ministry of Railways.
The new parts warehouses are located in Northeast China close to customer maintenance operations, and are configured to meet both the customer and EMD’s needs. “The customer measures locomotive fleet performance based on the amount of time each locomotive is not available to move freight thus swift and efficient parts supply is necessary to minimize downtime,” noted EMD.
“Each of the warehouses is designed to fit within the structure of EMD’s global materials management and finance operations and assuch, each utilizes EMD’s Enterprise Resource Planning (ERP)system,” said EMD. “This system allows for immediate access to inventoryinformation such as the location, and routing of parts.”
As expected, New Jersey Transit’s Board of Directors Wednesday approved fare increases averaging roughly 22% for its rail, light rail, and bus operations. Statewide rail operations suffered the steepest increase, averaging 25%, the target increase initially advanced by NJT earlier this year.
By contrast, increases for intrastate bus and light rail operations were more modest, up about 10%. NJT also restored almost $4 million in bus routes eliminations that were announced in March.
Off-peak rail discount fares will be eliminated. All changes are set to take effect Saturday, May 1.
Aware of the inevitability of the Board’s actions Wednesday, rail advocates attending the meeting at NJT’s Newark, N.J. headquarters still voiced their dissent, with one speaker lamenting the state’s willingness to punish transit riders “for doing the right thing,” while the state’s drivers suffer no comparable fate.
Gov. Chris Christie has vowed not to raise New Jersey’s state motor fuels tax, currently among the lowest in the nation. The state last raised its motor fuels tax, which funds the Transportation Trust Fund, in 1988. The TTF is a primary source of capital for improvements to New Jersey’s rail and highway infrastructure.
For additional perspective on see Railway Age Editor William C. Vantuono’s editorial, “Read my lips: No new gas tax?”
Maine Gov. John Baldacci said Tuesday he has created a watchdog group to oversee the proposed abandonment of about 240 miles of right-of-way and possible state purchase of the property.
Baldacci announced the move one day after state legislators in both houses approved a $57.8 million bond package containing $14 million to purchase northern Maine’s last major rail line, operated by Hermon, Maine-based Montreal, Maine & Atlantic Railway. The measure had sailed through the state House but the state Senate had balked at the proposal, with fiscal conservatives objecting to the potential debt burden passage would place on the state.
“This task force will ensure that [the] abandonment andacquisition process is done openly and in a way that protects the interests of Maine taxpayers,” Baldacci said in a statement Tuesday. “It will also work with the Department of Transportation and other interested parties to develop an operating plan once the railroad is purchased.”
The plan include the creation of a public-private partnership with the state, either MM&A or another carrier, and 22 stakeholders, including some of Maine’s largest manufacturers and businesses, to help acquire federal funding to save rail freight service in northern Maine. On a visit to Bangor, the state capital, earlier this month, FRA Administrator Joseph C. Szabo recommended such a partnership.