Cowen: ‘More Caution Surrounding Voting Trusts’

On May 19, we hosted a call with a noted transportation attorney to discuss the latest news surrounding the proposed merger involving KSU/CP/CNI. The STB decision on May 17 indicates more caution surrounding voting trusts; CNI must show that the trust keeps a level playing field. The key for CNI will be that public benefits outweigh harms.

For Railcar Buyers, Time to Pull the Trigger, Soon

Takeaways from Cowen and Company’s recent Rail Equipment Webinar show that locomotive upgrades remain solid, as traffic growth continues. Elevated inquiries for newly built railcars should begin to translate into orders gradually, despite the steel premium. Lessors are well-positioned as freight demand rises, railcar supply decreases and new builds fall short of replacement levels this year.

Amid Rising Railcar Demand, Who’s ‘Steeling’ the Show?

Railcar demand is on the rise, but so is the price of steel, which Cowen and Company estimates has put a 15%-25% premium on newly built equipment.

Cowen: Can UP Drive to 55?

At Union Pacific’s Investor Day, where achievements in operational efficiency, benefits of PSR implementation, shareholder returns and financial outlook were discussed, management predicted that the railroad will achieve a 55% OR (operating ratio) by 2022. As a result, Cowen and Company modestly adjusted its 2022 assumptions.

“We are seeing continued signs of recovery happening across the global Freight and Transit rail markets,” Wabtec President and CEO Rafael Santana said during a first-quarter 2021 report. “Freight volumes and equipment utilization are gradually improving, demand for freight aftermarket services is increasing, and sustainable investment in global transit remains strong.”

Wabtec 1Q21: ‘Earnings Beat, Backlog Grows Modestly’

Wabtec Corp. reported a “strong operational quarter” and a position of “profitable long-term growth,” due to continued signs of industry recovery, a modestly growing backlog, and its order pipeline.

NEARS/Cowen Fireside Chat with Keith Creel: CPKC ‘Least Risky’

As part of the NEARS (Northeast Association of Rail Shippers) virtual conference, Cowen and Company Managing Director and Railway Age Wall Street Contributing Editor Jason Seidl hosted Canadian Pacific President and CEO Keith Creel in a “fireside chat” to discuss the proposed merger between CP and Kansas City Southern.

Cowen Snap Shipper Survey Appears to Favor CPKC

A Cowen and Company “snap” railroad shipper survey conducted over a one-day period indicates that CN “is likely to have a more difficult time with shippers supporting its proposed acquisition of Kansas City Southern. This compares to a more favorable view by shippers of Canadian Pacific acquiring KCS in our most recent survey.”

“We generated solid productivity through efficient use of our resources despite the significant weather event that covered most of our network in February and early March,” UP Chairman, President and CEO Lance Fritz said during a first-quarter 2021 earnings announcement.

UP: ‘Solid Productivity’ in 1Q21, ‘Improving Outlook’ for 2021 (Updated, Cowen)

Due in large part to weather-related network disruptions, Union Pacific’s first-quarter 2021 financials lagged those of the prior-year period, but North America’s largest Class I expressed confidence that business will improve, and affirmed its guidance.

CP’s operating ratio, which included a $33 million expense related to the Kansas City Southern (KCS) acquisition, came in at 60.2% for the first three months of 2021. This is a 100 basis-point increase from 59.2% in the prior-year period. Adjusted, the first-quarter 2021 OR improved 70 basis points to 58.5%.

CP: ‘Bullish’ on 2021

“The strong demand environment, particularly across bulk, merchandise and domestic intermodal, coupled with our commitment to the foundations of Precision Scheduled Railroading enabled our success in the first quarter,” Canadian Pacific (CP) President and CEO Keith Creel reported during the merger-bound railroad’s earnings announcement.

Intermodal and other revenue growth in first-quarter 2021 “was more than offset by declines in merchandise, coal and fuel surcharge revenues,” CSX reported.

For CSX, 1Q21 Revenue Down Slightly, Volume Growth Expected in 2021 (Updated, Cowen)

CSX, the second Class I railroad to report first-quarter 2021 financial results, earned $706 million, or $0.93 per share—down 8.31% from the 2020 period’s $770 million, or $1.00 per share.

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