Montreal-based Bombardier, Inc. has been awarded a C$2.23 billion contract by the Toronto Transit Commission to produce 204 low-floor light rail vehicles for Canada’s largest city. Bombardier said it expects to deliver the first cars to TTC by 2012. TTC’s purchase is said to be the largest LRV purchase ever in North America, and includes an option for even more cars, should Toronto’s proposed “Transit City” plan be implemented.
Bombardier’s bid was chosen over rival Siemens Transportation, but only after months of debate and dispute over TTC’s original bid process. The contract is expected to be formally voted on Monday by the nine Toronto city council members overseeing TTC, but approval is expected.
No funding is yet assured from either the federal governmentor the province of Ontario, though TTC officials say they believe such assistance will be forthcoming, possibly in amounts up to C$1.4 billion.
Last summer Bombardier was rebuffed by TTC after the manufacturer seemingly had won an earlier bid for the agency’s contract, beating out British manufacturer TRAM Power Ltd. TTC, however, questioned Bombardier’s earlier bid, citing design flaws, a claim Bombardier rejected. Last February Bombardier resubmitted its bid, challenged this time by Siemens.
TTC and Ontario province require that the new cars meet a 25% “buy Canadian” content threshold. Bombardier likely will do much of its manufacturing work at its Thunder Bay, Ont., facility, though it likely also will tap several of its European-based plants for the project.
Zhejiang Zheda INSIGMA Group Company Ltd. (INSIGMA), Hangzhou, China, has awarded Ansaldo STS USA a contract worth approximately $9.2 million for design and implementation of a new communications-based train control (CBTC) system on the Xi'an (Tianjin) Metro Line 2. The contract is part of a Strategic Alliance Agreement with INSIGMA. Ansaldo STS USA will provide system design, key system components, and vital safety software. INSIGMA will manufacture certain CBTC equipment under a technology license and perform application engineering.
The project will be done in two phases. The Xi'an Metro Line 2 will add 16.32 miles to the city’s metro system. Phase 1 will incorporate Beike Station to Expo Center Station, with a passenger ready date anticipated for September 2011. Phase 2 will cover from Fexiyuan Station to Weiqu South Station, with an expected in-service date of December 2012.
The complete Line 2 configuration will include 21 passenger stations, 22 trains, an operations control center (OCC), depot with test track, and a maintenance center and training center.
BNSF after the bell Thursday reported first-quarter earnings of 86 cents per share, down from $1.30 per diluted share in the first quarter of 2008, as freight revenue fell 20% in the comparable period, from $4.14 billion to $3.31 billion. BNSF’s operating ratio rose to 79.8% in the first quarter from 78.9% in the comparable 2008 quarter.
Wall Street analyst estimates exclusive of any one-time charges were for earnings of 96 cents per share on revenue of $3.68 billion.
The company attributed much of the revenue decline to a decrease in fuel surcharges of approximately $325 million and a $96 million charge in excess of amounts previously accrued related to the unfavorable coal rate decision.
The remaining variance, it said, was due to lower unit volumes as a result of the economic downturn, partially offset by improved yields.
“During the first quarter of 2009, BNSF’s focus on cost control and a variable cost structure enabled us to weather a difficult economic environment,” said BNSF Chairman, President, and Chief Executive Officer Matthew K. Rose. “BNSF continues to manage through the recession and is well positioned to take advantage of the eventual economic recovery."
Morgan Stanley analysts William Greene and Adam Longson agreed with Rose's assesment: "After years of lackluster productivity gains, BNSF's first-quarter 2009 was a breakout. We underestimated the labor cost opportunity and how successful BNSF had been in building a more variable-cost rail model (customers are more likely to own railcars). We've noted for some time that Western rails should outperform Eastern rails. BNSF's quarterly results were impressive no matter how we slice it. We are increasing our 2009 estimate of $4.60 to $4.90 as well as our 2010 EPS forecast from $5.15 to $5.35. Accordingly we are also increasing our price target by $5 to $70 while maintaining our Hold rating. We believe the company is taking the right steps to control costs during a weak freight environment while simultaneously improving service levels."
U.S. freight carload traffic for the week ended April 18 plummeted 24.3% from the comparable week one year ago, the Association of American Railroads reported. Traffic declined 20.6% in the West and 28.6% in the East ,and fell in all 19 carload commodity groups charted by the AAR.
U.S. intermodal volume fell even more sharply, down 28.3%. Total volume of 27.2 billion ton-miles was down 23.2% from the comparable week in 2008.
Canadian freight carload traffic declined 25.2% for the week compared with one year ago, while intermodal fell less precipitously, down 17.0%. Mexico’s two major railroads saw freight carload traffic decline 9.8%, while intermodal dropped 21.9%.
Combined North American rail volume for the first 15 weeks of 2009 on U.S., Canadian, and Mexican railroads was down 18.1% from the first 15 weeks of 2008; intermodal was off 15.7% for the same comparable period.
Union Pacific reported its first-quarter net income fell 18% to $362 million, or 72 cents per share, down from first-quarter 2008’s $443 million, or 85 cents a share. But the railroad still beat Wall Street analyst consensus estimates of 66 cents per share.
UP Chairman and Chief Executive Jim Young said the economic environment continued to hurt volumes. Revenue dropped 20% to $3.42 billion, mirroring a decline in volume of 21% during the quarter.
"In the first quarter, we experienced one of the most challenging business environments we've ever seen," Young said during a conference call with analysts.
Shares of UP were up 3.21% in Thursday morning trading on the New York Stock Exchange.
Dahlman Rose & Co. said that, based on first-quarter performance, it's raising its 2009 EPS estimate for UP from $3.50 to $3.70 as well as its 2010 EPS forecast from $4.00 to $4.30. "Accordingly we are increasing our price target for Union Pacific by $4 to $60," said Director Equity Research Jason Seidl, a Railway Age contributing editor. "Although the economy will undoubtedly provide near term challenges for UP, the railroad has clearly showed us its ability to truly weather the storm. Indeed, once freight levels eventually return, UP has ample capacity to take them on without spending significant excess capital. We continue to believe that the company’s true operating ratio lies somewhere south of 70%. Accordingly, we reiterate our Buy rating on the company’s shares."
Said Morgan Stanley analysts William Greene and Adam Longson: "We've noted that UP will report the best 2009 EPS trend among rails or parcel given company-specific growth opportunities and fewer headwinds than peers. 1Q results give us even greater conviction. Despite the worst volume decline (down 21%), UP's EPS fell only 15%—the best performance after BNSF, where volume fell only 14%. Nearly as important, we believe that the first half of 2009 will mark the trough in both rail volumes and earnings, which we can't say for parcel. Rails are trading below mid-cycle multiples while other transports trade near peak. With volumes declines likely to improve soon, and reasonable valuation with opportunity for multiple expansion, rails should be the best "early-cycle" play in freight at this point. UP remains our top pick. UP's productivity gains are likely more sustainable than other rails."
Lower freight volume depressed Canadian Pacific’s first-quarter net earnings of C$62.5 million (US$51 million), or 39 Canadian cents per share, falling short of Wall Street analyst expectations of 48 Canadian cents per share and also down from C$90.8 million, or 59 Canadian cents per share, logged during the first quarter of 2008.
Revenue of C$1.07 billion (US$872 million) was down 6.6% for the quarter compared with one year ago. CP’s operating ratio rose to 87.0% from 82.4% in the year-ago quarter.
Chief Executive Fred Green pointed to an "unprecedented decline" in some business lines, such as potash, which is off 70%, Canadian coal, off 30%, and automotive shipments, down 43%.
CP officials said the company will cut back on its 2009 capital program; CP now plans to invest between C$720 million and C$740 million, instead of its original target of C$800 million to C$820 million.
Shares of CP were up 1.27% in morning trading Thursday on the New York Stock Exchange.