Thu, May 21, 5:15 PM
- The Association of American Railroads says crude oil carried by big U.S. railroads fell nearly 14% Q/Q to ~113K carloads as oil companies cut back domestic shipments.
- Industry execs have cautioned that lower oil prices could end up slowing volume growth this year because the low prices will not support Bakken Shale crude, which is more expensive to extract and ship than other oil.
- Although total rail cargo volumes have continued to come in below expectations, Morgan Stanley analysts say a rally in energy prices could help boost railroad stock prices.
- Relevant tickers: CSX, NSC, UNP, KSU, BRK.A, BRK.B
Wed, May 20, 6:41 PM
- Union Pacific's (NYSE:UNP) coal shipments are down 25% so far in Q2 and the company does not foresee much improvement for the rest of the period, CFO Robert Knight Jr. warned today, in a much steeper decline than the single digits UNP execs had expected last month.
- At a transportation industry conference, Knight attributed the weak coal shipments to low natural gas prices and mild weather.
- The CFO also said UNP's Q2 performance still will reflect the effects of operating efficiencies despite furloughing additional employees and placing more locomotives back in storage.
Thu, May 14, 10:34 AM
Thu, May 14, 10:04 AM
- Railroad stocks are tilting lower after Kansas City Southern pulls its 2015 guidance at an investor conference.
- Investors are taking a cautious approach to Union Pacific (UNP -0.3%), Genesee & Wyoming (GWR -2.2%), Norfolk Southern (NSC -0.6%), CSX Corporation (CSX -0.1%), Canadian National Railway (CNI -0.5%), and Canadian Pacific (CP -0.3%) off the warning from Kansas Southern.
- Safety concerns also continue to linger in the sector which is seen as a development that could put some pressure on spending and investments.
- Previously: Kansas City Southern -3% after pulling guidance
Wed, May 13, 11:24 AM
- The U.S. oil industry is challenging new rules aimed at improving the safety of moving crude oil by rail, as the American Petroleum Institute petitions the U.S. Court of Appeals for the D.C. Circuit to block key provisions of rules unveiled earlier this month.
- The petition seeks to block a requirement that older tank cars be retrofitted with new safety features designed to prevent them from spilling oil or rupturing in a derailment, and challenges a requirement that tank cars be equipped with new electronic braking systems or face operational restrictions.
- Environmental groups say the new rules do not go far enough, and are considering their own legal challenge.
- Relevant tickers: CSX, NSC, UNP, CNI, CP, KSU, BRK.A, BRK.B, GBX, WAB, TRN, ARII, RAIL
Tue, May 5, 5:43 PM
- Norfolk Southern (NYSE:NSC) CEO Wick Moorman says the rail industry will challenge the U.S. government’s new crude-by-rail regulations, worried that the new rules could make shipping crude oil by train prohibitively expensive.
- The Department of Transportation last Friday called for the installation of new braking systems on trains hauling more than 70 cars of crude oil by 2021, a requirement Moorman says took the rail industry by surprise.
- The CEO tells WSJ that the new rules place railroads in a difficult spot because railroads do not own the vast majority of tank cars and thus have no control over whether the costly new brakes are installed; also, the brake requirement is not a mandate for tank car owners, only railroads, he says.
- Moorman says he is sure the industry will challenge the new rules either in court or petition the DoT for reconsideration.
- Relevant tickers: CSX, UNP, CNI, CP, KSU, BRK.A, BRK.B, GBX, WAB, TRN, ARII, RAIL
Fri, May 1, 2:36 PM
- U.S. regulators issue tough new rules for safer transportation of crude oil by trains, introducing a new tank car standard and mandating the use of new braking technology.
- The rules require that the oldest, least safe tank cars be replaced within three years with new cars that have thicker shells, higher safety shields and better fire protection; a later generation of tank cars, built since 2011 with more safety features, will have to be retrofitted or replaced by 2020.
- Regulators are not asking railroads to notify communities of any oil train traffic but will require a “point of contact” for information related to the routing of hazardous materials.
- Shares of tank car makers are higher: GBX +7.2%, WAB +7.4%, TRN +7.4%, ARII +7.2%, RAIL +5.7%.
- Other relevant tickers: CSX, NSC, UNP, CNI, CP, KSU, BRK.A, BRK.B
Mon, Apr. 27, 12:59 PM
- Declining output from shale oil fields has in turn cut demand for key types of railroad cars, according to new industry figures, in the latest sign of the fallout from lower crude oil prices.
- Buyers ordered 4,470 new railway tank cars during Q1, down 6% Y/Y and ~70% below the nearly 15K tank cars ordered during Q4, according to the Railway Supply Institute trade group.
- Q1 orders for covered “hopper” cars, used mostly to deliver fracking sand to drill sites, also fell to 131 cars from 11.5K a year ago and 8,627 cars during Q4.
- Tank car orders had surged with shale oil output, generally transported to refineries by rail, but output from North Dakota’s Bakken Shale field dropped in both January and February, and the U.S. Energy Department predicts continued declines in output there for April and May.
- Relevant tickers: TRN, ARII, GBX, WAB, CSX, NSC, UNP, CNI, CP, KSU, BRK.A, BRK.B
Mon, Apr. 27, 7:44 AM
- In his "We Are Full of Bull" note this morning, Morgan Stanley's Adam Parker says the economy will accelerate in Q2 and Q3, bringing stocks along for the ride. If investors are gun-shy thanks to record levels for the averages, Parker suggests looking for names with decent long-term earnings forecasts trading at a discount to the market.
- The ten largest U.S. stocks trading at a discount, but with above-average expected growth rates: Apple (NASDAQ:AAPL), Citigroup (NYSE:C), Gilead (NASDAQ:GILD), Union Pacific (NYSE:UNP), Actavis (NYSE:ACT), Twenty-First Century Fox (NASDAQ:FOXA), Time Warner (NYSE:TWX), Ford (NYSE:F), BlackRock (NYSE:BLK).
- Conversely, one might want to avoid those stocks selling for substantial premiums. The ten largest stocks trading at a premium to the market while growing at a below-average rate: Exxon (NYSE:XOM), Procter & Gamble (NYSE:PG), Chevron (NYSE:CVX), Coca-Cola (NYSE:KO), Pepsico (NYSE:PEP), Schlumberger (NYSE:SLB), MMM, McDonald's (NYSE:MCD), UPS, Nike (NYSE:NKE).
- Source: Bloomberg
Thu, Apr. 23, 8:04 AM
Fri, Apr. 17, 4:47 PM
- Trains carrying crude oil will be restricted to a 40 MPH speed limit in populated areas such as New York, one of the steps required by an order from the U.S. Department of Transportation in response to a series of derailments.
- The emergency order makes the agreement mandatory for all railroads hauling 20 or more tank cars linked together or 35 cars in total that are filled with oil or other flammable liquids, and applies to both older model DOT-111 tank cars and CPC-1232s the industry has been voluntarily building since 2011.
- The DoT also issued an advisory to railroads to use the latest technology to check for flaws in train wheels that can cause a crash; a broken train wheel is suspected of causing the March 5 derailment near Galena, Ill., of a BNSF Railway (BRK.A, BRK.B) train hauling 103 cars of Bakken crude.
- Other relevant tickers: CSX, UNP, NSC, KSU, GWR, CNI, CP
Tue, Apr. 14, 7:38 AM
- A detailed study from Cowen & Company on the railroad industry concludes this year will be one of the most difficult in years.
- Pricing pressure is at the heart of the firm's concerns.
- "Intermodal renewals have been occurring at considerably high rates, and the slight 10-bps decline in overall rail pricing in our survey suggests that non-intermodal pricing may be tempered enough to more than offset the intermodal rate strength," reads the report.
- Norfolk Southern (NYSE:NSC) warned on profit last night, while CSX (NYSE:CSX) reports Q1 earnings tomorrow.
- Railroad stocks: UNP, CNI, ARII, GBX, CP, KSU, WAB, TRN.
Fri, Apr. 10, 5:36 PM
- Union Pacific (NYSE:UNP) is upgraded to Buy from Hold with a $120 stock price target at Stifel, which sees attractive risk-adjusted upside potential in the shares for the first time in a while.
- The firm believes UNP's strong management team has a track record of performance and operational excellence, and that the railroad's network provides sustainable growth given that it touches all six U.S.-Mexico gateways, west coast ports, and growing economic regions in America.
- Stifel says UNP's stock price drop since Kansas City Southern's (NYSE:KSU) profit warning in late March are overdone, as corrections in KSU's guidance are "not uncommon."
Mon, Apr. 6, 6:51 PM
- The exploding growth in oil train shipments fueled by the U.S. energy boom has sputtered in recent months, hurt by safety problems and low crude oil prices, WSJ reports.
- Railroads have been a major beneficiary of the U.S. energy boom, as some oil companies turned to trains to move crude to refineries from North Dakota and other areas underserved by pipelines, but WSJ says ~1.38M bbl/day of oil and fuels such as gasoline rode the rails in March vs. an average of 1.5M bbl/day in the same period a year ago.
- BNSF Railway (BRK.A, BRK.B), which is responsible for ~70% of U.S. oil train traffic, operated as many as 10 trains a day last year but now is averaging nine a day.
- Shipping oil across the U.S. by train can cost $6-$12/bbl, which makes sense only when the price of U.S. crude is significantly cheaper than oil pumped overseas; in recent weeks, the price gap between U.S. and Brent has narrowed to ~$7/bb, making some oil train shipments too costly at this time, but Barclays thinks U.S. crude may sell for $13/bbl less than Brent, which would boost oil train shipments later this year.
- Other relevant tickers: CSX, UNP, NSC, KSU, GWR, CNI, CP
Tue, Mar. 31, 2:16 PM
- MKM Partners thinks the smart move is to sell railroad stocks and buy airlines.
- Chief Market Technician Jonathan Krinsky leans on technical analysis (video) in making the transportation call.
- Avondale Partners is also out with a bearish take on railroads.
- The investment firm lowers Canadian Pacific (NYSE:CP), Norfolk Southern (NYSE:NSC), CSX (NYSE:CSX), Canadian National Railway (NYSE:CNI), and Union Pacific (NYSE:UNP) to Market Underperform on earnings growth concerns.
Thu, Mar. 26, 12:41 PM
- U.S. rail stocks are under pressure, led by Genesee & Wyoming (GWR -1.9%) after cutting Q1 revenue guidance to $375M, $25M less than guidance provided Feb. 10 and below analyst consensus of $418M.
- GWR says Q1 traffic has been weaker than its expectations due to severe winter weather in four of its North American regions, as well as weakness in certain commodity groups, including steam coal and metals.
- GWR's stock price target is cut to $108 from $113 at Credit Suisse, citing February carload data that points to a decline in both thermal coal and metals.
- Also, Union Pacific (UNP -2.1%) was downgraded earlier by Cowen as the firm adjusts UNP's growth expectations, and Norfolk Southern (NSC -0.2%) was downgraded by Raymond James.
UNP vs. ETF Alternatives
Union Pacific Corp is a rail transporting company. Its operating company is Union Pacific Railroad Company. It links 23 states in the western two-thirds of the country by rail, providing a critical link in the global supply chain.
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