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Focus: Transportation Management

Feature Article from Our Transportation Management Subject Area - See All

From SCDigest's On-Target E-Magazine

- May 7, 2015 -


Logistics News: Q1 2015 Rail Carrier Review


Rail Carriers See Decent Results, Strong Pricing, Even as Volumes Mostly Flat

SCDigest Editorial Staff

US rail carriers had a positive but somewhat lackluster performance in Q1, with revenues and carloads basically flat, though continued gains in efficiency saw decent bottom line improvements for most.

SCDigest Says:

Despite generally flat volumes, most of the rail carriers described a favorable pricing enviroment in Q1, more bullish in fact than most recent quarter.
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We're back as usual every quarter with our review of the results and trends across freight modes, starting this week with US rail carriers, which all posted their results before the end of January.

We hope to cover the US truckload sector next week - if the reporting is complete - and then the LTL carriers the week after that.

Here we look at the four major Class I public carriers that make up the US rail sector (Burlington Northern is of course part of public company Berkshire Hathaway, but its results are not broken out in any detail and thus are not included)

We generally also report on year-to-date metrics, but since in Q1 the year-to-date and quarterly numbers are the same, there is no need for that additional reporting.


On a macro sense, Q1 was basically flat for US rail carriers, with the Association of American Railroads reporting that total US railcar volumes were up just 0.2% in Q1, at 6,385,680 total units. Traditional railcar volumes were up 0.3%, while the generally fast growing intermodal sector was up just 0.1% in the first quarter.


Despite generally flat volumes, most of the rail carriers described a favorable pricing enviroment in Q1, more bullish in fact than most recent quarters.


Union Pacific, for example, said it saw a rise in "core pricing" gains of 4% in Q1, much stronger than in most recent quarters, as shown in the chart below.


Changes in Core Pricing at Union Pacific in Recent Quarters



Average operating ratios, or operating expense divided by operating revenue, a key metric in the transport sector, improved 1 percentage point to 70.6%, but that was led by two carriers - Union Pacific and CSX - who both saw improvement of about 3 percentage points. Kansas City Southern was basically flat, while Norfolk Southern saw an increase of 1.2 percentage points.


Even just within the rail sector, Union Pacific's operating ratio is now almost 12 percentage points better than that of Norfolk Southern, and down to an impressive 64.8%.


The full Q1 rail results, compiled by SCDigest from each company's Q1 earnings materials, is provided below.


Q1 2015 US Rail Carrier Results


(Transportation Management Article Continued Below)



In the section below, we break out key points made in each carrier's earnings releases and analyst presentations, although the carriers actually said very little in this quarter's commentaries.


Union Pacific

UP achieved 9% earnings per share growth in the first quarter," as solid core pricing gains were partially offset by a sharp drop in volume." The CEO said that "While we took actions during the quarter to adjust for the volume decline, we did not run an efficient operation."

Has $4.2 billion in planned 2015 capital spend. That includes 218 new locomotives, 800 freight cars, amd more than 3,500 containers and 6,500 chassis. $1.8 billion will go towards infrastructure replacement.


Saw 'an improved pricing environment" in Q1.

Company increased its dividend for the 13th time in 10 years, representing a 26% compound annual growth rate during that time.

Norfolk Southern

Company said "Our first quarter results reflected continued weakness in our coal markets along with a slowdown in network velocity in part caused by severe winter weather which impacted both our expenses and our volumes."

Revenue per carload excluding fuel surcharge was down 2%, partly as a result of growth in intermodal, which has lower pricing.

Said overall pricing was "positive," however.

Any reaction to our Q1 2015 rail segment review? Let us know your thoughts at the Feedback button (for email) or section (for web form) below.



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