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Page added on August 3, 2005
US rail industry posting record earnings
While airlines choke on high gas prices like a canary in a dangerous coal mine, and auto manufacturers try new gimmicks to get people to buy their cars, U.S. railroads and rail car suppliers are posting sharply higher earnings, some of which were records in the second quarter. Here are some recent, interesting news briefs from a rail industry publication….
Coal coasts to new record on Norfolk Southern
Norfolk Southern says its coal shipments reached a record volume of 45.7 million tons in the first quarter, exceeding the previous record, set in 2001, by 1.9%. A new record was also set in the second quarter for total coal, coke, and iron ore volume, which reached 47.3. million tons, up 2.6% from the previous record set in the fourth quarter of 2004. NS said the surge in coal traffic resulted from the continued rebuilding of stockpiles by utilities, plus shipments to a new coke plant and strong demand for domestic metallurgical coal.
GATX Rail net up sharply; so are car prices
GATX Rail’s utilization of its 107,000-car North American fleet continued at the high level of 98% in the second quarter as the company posted a net income of $23.1 million compared to $18.7 million in the prior-year period. The strong market has caused freight car prices to rise “sharply,” commented the leasing company. “While this provides us with advantaged new car costs under our Committed Purchase Program, economics on car purchases in the spot market are less appealing at this time,” said GATX Corp. President and CEO Brian A. Kenney. “We will remain disciplined in our investment approach.”
Florida East Coast raises full-year earnings forecast
Florida East Coast Railway reported a 17.5% increase in revenues in the second quarter, to a record $58.9 million, and a 25.7% increase in operating profit, to $15.9 million, compared to the same period in 2004. The operating ratio improved to 73.0% from 74.5%. Florida East Coast Industries Chairman, President, and CEO Adolfo Henriques said that given the strong first quarter performance “we are increasing the 2005 full-year outlook.” Railway segment revenues are now expected to range between $220 million and $230 million, an increase of ll-15% over 2004 , and operating profit is expected to range between $56 million and $58 million, up 18-23%.
NS operating efficiency soars in record quarter
Norfolk Southern reported July 27 that it shaved its operating ratio by 4.1 percentage points to a lean 72.5% in the second quarter, a period that saw operating revenues rise by 19% to $2.15 billion, railway operating income increase by 39% to $592 million, and net income soar to $424 million, all records. NS shares rose 4.55% on the strength of the news.
Second-quarter net income included two special items totaling $120 million related to coal rate adjustments and tax legislation in Ohio. Without these items, earnings would have been $304 million, or 75 cents per share, still a record for any quarter before accounting changes. Wall Street’s consensus earnings estimate was 65 cents.
NS posted record net income of $518 million for the first six months, up 67% from the same period a year earlier. Operating revenues also set a six-month record, rising 17% to $4.1 billion.
Second-quarter strength came both from general merchandise revenues, which were up 12% to a record $1.15 billion, and a surge in coal revenues, up 36% to $578 million compared with the prior-year period. Intermodal revenues were up 18% to $428 million. Higher rates and fuel surcharges contributed to the increase in revenues.
Second-quarter operating expenses were up 13% to $1.56 billion from the corresponding period last year, primarily due to higher fuel prices and the costs of additional train and engine service crews and maintenance activities associated with higher business levels.
CSX net earnings increase 38%
CSX has reported net earnings of $165 million for this year’s second quarter, 73 cents per share, a 38% increase from the second quarter of 2004. Surface Transportation revenue rose 8% to $2.2 billion, producing the 13th consecutive quarter of year-over-year growth, and operating revenue increased to $422 million, up $142 million over last year’s quarter. (The Surface Transportation operating ratio was not immediately available.)
“This was our sixth consecutive quarter of core earnings growth,” said CSX Chairman, President, and CEO Michael J. Ward. “It was also the second consecutive quarter of record operating income in Surface Transportation, reflecting overall strength in our markets and an increased focus on productivity. In the future, we expect a continuation of favorable economic conditions, industry growth, and a strong pricing environment. At the same time, CSX is taking the necessary steps to improve service for our customers and drive long-term growth for our shareholders.”
In a conference call announcing first quarter results, CSX said it expected earnings for the year to range between $3.15 and $3.25 cents a share. This compares with a recent Wall Street forecast of $3.07.
FreightCar America stock climbs on strong earnings
Shares of FreightCar America rose more than 23% after the company posted a second-quarter profit of $9.1 million, or 76 cents per share, vs. a net loss of $4.3 million, or 63 cents per share, in the prior-year period. Sales totaled $230.76 million for the quarter compared to $94.9 million in the same period a year ago. Freight car orders were up 60% to 5,104 units, and the unfilled order backlog doubled to nearly 16,000 units.
Portec reports record sales and earnings
Portec Rail Products, Inc., earned net income of $1.708 million on sales of $24.1 million in this year’s second quarter, compared with a profit of $1.464 million on sales of $18.5 million in the second quarter of 2004. The company posted first-half 2005 net income of $2.713 million on sales totaling $44.9 million, up from $1.121 million on sales of $33.7 million for the corresponding 2004 period. “Our second quarter 2005 net sales and net income were a record for the company,” said President and CEO John S. Cooper. “All six of our business units contributed to the record performance for both the second quarter and first half of 2005, and our new order bookings increased throughout the second quarter. Business was particularly strong for our track component and friction management products at our Railway Maintenance Products Division and at our Montreal operation.”
Canadian Pacific Railway ‘brings it home’
“The fluidity across our network is generating greater operating efficiency, which is driving more of our growth to the bottom line,” said Canadian Pacific Railway President and CEO Rob Ritchie, during today’s second-quarter earnings announcement. Despite increased workloads and a $160 million track capacity expansion project along its busiest corridor (between the Canadian Prairies and Vancouver), “CPR employees know what our company has committed to deliver and they are bringing it home,” he maintained.
CPR’s operating ratio for the quarter came in at 75.5%, improving by 2.5 percentage points. Net income grew 47% to C$123.2 million, or 77 Canadian cents a share, from C$83.7 million, or 53 Canadian cents a share, in the year-earlier period. Excluding foreign exchange losses on long-term debt, earnings would have been 87 Canadian cents a share in the second quarter. Operating income increased 23% to C$271.1 million from C$220.6 million. These results were achieved even with a 7% rise in operating expenses, which were due, in large part, to higher fuel prices, according to the railroad.
Second-quarter revenue was up 10% to C$1.11 billion, driven by increases of 48% in coal, 10% in intermodal freight, and 7% in grain over the same period last year. For the first six months of the year, revenue rose 12% to C$2.12 billion from C$1.89 billion in first-half 2004. The railroad expects revenue to grow 12% to 14% in 2005. And assuming oil averages $55 per barrel and the exchange rate averages about 81 U.S. cents to the Canadian dollar, earnings per share in 2005 will be in the range of C$3.15 to C$3.25.
Wabtec earnings up 60%
Based on strong sales growth and “strong demand for new rolling stock” that boosted sales by 31%, Wabtec Corp. posted second-quarter 2005 earnings per diluted share of 32 cents, a 60% increase compared to the year-ago quarter’s figure of 20 cents and the fifth consecutive quarter the company has reported an earnings increase. Wabtec also affirmed its previous guidance for 2005 full-year earnings per diluted share of about $1.10, a growth rate of about 55% compared to 2004. Net income for the quarter was $15.2 million and EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) was $32.7 million, compared to $9 million and $23.5 million, respectively, in 2004.
Wabtec’s 31% quarterly sales increased to $270.2 million, a record, “mainly due to strong demand for locomotive and freight car components, the CoFren (assets of R
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