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Traffic downturn expected to take toll on railroads’ fourth quarter earnings NEWSWIRE

By Bill Stephens | January 7, 2020

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Analysts expect fourth quarter earnings to fall at four of the six publicly traded Class I railroads as cost cutting, rate increases, and share buybacks were not enough to offset the impact of traffic declines.

On average, earnings per share at the six publicly traded railroads will fall by 1%, according to consensus estimates by Wall Street analysts.

Railroad executives will give their outlooks for the year, and unveil capital spending plans, during earnings calls scheduled over the next three weeks.

CSX Transportation will kick off Class I earnings when it reports its fourth quarter and full year results on Jan. 16. The railroad’s earnings are expected to slide by 1.9%, according to I/B/E/S. CSX’s traffic declined 6.5% in the fourth quarter, according to weekly carload data reported to the Association of American Railroads.

Kansas City Southern is expected to report significantly higher earnings on Jan. 17. Analysts expect its earnings per share to rise 19% as the railroad’s shift to a Precision Scheduled Railroading operating model produces efficiency gains and cost savings. KCS’s traffic declined 0.7% for the quarter.

Canadian Pacific is scheduled to report its financial results on Jan. 21. CP’s earnings are expected to rise 2.6% despite a 1.5% quarterly decline in traffic.

Union Pacific, whose traffic plunged 11% in the fourth quarter, is expected to see its quarterly earnings drop by 1.4%.

Canadian National is expected to report an earnings decline of 16% on Jan. 28. Its traffic declined 7.8% in the fourth quarter.

Norfolk Southern’s earnings are expected to dip 8.5%, nearly in line with its 9.1% fourth quarter decline in traffic. The railroad will report its financial results on Jan. 29.

BNSF Railway, a unit of Berkshire Hathaway, is expected to report earnings alongside its parent company on Feb. 24. BNSF’s traffic dipped 6.2% in the quarter.

9 thoughts on “Traffic downturn expected to take toll on railroads’ fourth quarter earnings NEWSWIRE

  1. Mr Smith, the railroads have lost or run off what they consider marginal business and given it to the truckers. They have for the last 40 years given up what they consider to be marginal traffic over and over again. And now they have great pressure to cut cost at and increase profits from Wall Street like never before. Railroads in the U.S. carry a smaller percentage of goods than ever before. And the trend isn’t reversing even as the economy is growing. As you said one bad quarter does not mean the industry is dying. But 60 or more years of steady market share loss says something. Even if the stock price stays high. A business model like that isn’t sustainable.

  2. Mr. Thompson,

    A bad quarter or bad year does not portend the collapse of an industry. Quarterly financial results are meaningless.

    If one looks back over the last five years, which is the minimum time required to see meaningful financial trends, the nation’s major railroads are doing reasonably well.

    Like all businesses, railroads face headwinds. If the past is prologue to the future, management will scale its operations to market demand while looking for new opportunities to grow the business.

  3. If the sustained downward trend in traffic levels despite GDP growing at 1-2% doesn’t tell you enough, then management’s very lax, “nothing is wrong” attitude should. It tells you nothing will be done to fix very obvious problems because they aren’t problems to management. There’s no indication that contraction will cease or that there will even be a meager interest in finding new business, or even competing for existing business / market share (I’m looking at you, TOP21). So, even if the downward trend has only lasted a year, we all know it has the potential to last a whole lot longer than that.

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