User 403315

Railroad Companies: Good, Better, Best

I won't mention which one but I work for one of the western railroads. With volumes down almost 20% due to the recession/depression we're hurting revenue wise but check out the recent earnings announcements - costs have been well controlled and profits are healthy.

A couple of comments on the article: BNI and UNP have a huge advantage with Powder River coal but don't have a particular edge over each other. Look for the possibility of exporting coal to China, they've expressed interest but there isn't real infrastructure to handle the business now. International intermodal can be expected to rise and fall directly with the economy. Domestic intermodal as a long term trend is moving to a "hub and spoke" system where rail will handle shipments over 500 miles and trucks will handle from major intermodal terminals. Agriculture will continue to grow due to increased exports. Ethanol could be great or could fizzle out, that will be a completely political issue. Industrial products will also rise and fall with the broader economy. Passneger rail is a long way from being a big part of the business, if it ever will be.

Long term there is a lot of potential and little downside simply because it would be impossible for trucks to handle the tonnages that rails move. Also look for technology to continue to improve efficiency and lower costs.

Finally, the big elephant in the room is re-regulation. Since the industry was deregulated in the early 80's efficiency and cost to the customer have improved drastically but with the current government climate who knows if Congress or the Administration will notice. Maybe once we're done socializing the financials and the auto industry we'll turn to wrecking healthy companies as well...