|Bid||137.15 x 2200|
|Ask||139.26 x 1200|
|Day's range||137.87 - 139.03|
|52-week range||101.06 - 148.33|
|PE ratio (TTM)||10.02|
|Earnings date||19 Jul 2018|
|Forward dividend & yield||2.92 (2.01%)|
|1y target est||155.24|
The U.S. rail network congestion might weigh on Kansas City Southern's (KSU) Q2 earnings. Moreover, it is likely to generate low revenues at the Agriculture & Minerals and the Energy segments.
With fuel prices shooting up since the past few months, United Continental (UAL) anticipates high fuel costs to weigh on its bottom line in the second quarter.
High operating expenses as well as low revenues at some of Canadian Pacific's (CP) segments are expected to ail its Q2 results.
The Zacks Analyst Blog Highlights: Union Pacific, Twenty-First Century Fox, BP, Mondelez and TOTAL
Volume growth at intermodal segment is anticipated to drive J.B. Hunt's (JBHT) results. Solid revenues at DCS and ICS segments are also expected to boost the company's top line.
In the previous part of this series, we examined the leverage levels of major US railroads after their first-quarter earnings. Now let’s consider their dividend payments. Since it’s a capital-intensive industry, railroads reinvest most of their net earnings back into the business. The retention per share ratio is thus very high. That, in turn, lowers their dividend payout ratios. The transportation and logistics sector is included in the industrials sector. Railroads’ dividend yields have been historically lower than the other subsectors in the industrial (IYJ) sector.
In Week 25, which ended on June 23, Western US rail giant Union Pacific’s (UNP) carload traffic declined, in contrast to a rise reported by US railroads overall. The railroad posted a YoY (year-over-year) carload traffic loss of 1.6%. It hauled ~96,000 carloads that week compared to 97,500 the previous year. Compared to US railroads’ (XLI) 2.5% YoY growth, UNP saw a negative carload traffic change in Week 25. Its carload volumes trended in the opposite direction of rival BNSF Railway’s (BRK.B) carload traffic change.
Major Western US rail freight carrier BNSF Railway is privately owned by Berkshire Hathaway (BRK.B). In Week 25, its carload traffic grew more than intermodal. Normally, it’s the other way round. That week, BNSF’s carload volumes grew 6.5% YoY (year-over-year) to 100,800 railcars compared to 94,600.
What differentiates UNP is the fact that it has upped its capex-to-revenue ratio in the first quarter by 0.8%, from 15.8% in Q1 2017. The capex-to-revenue ratio for Eastern US rail carrier Norfolk Southern (NSC) is 14.1% for the first quarter, from 17.1% in Q1 2017. Canadian National Railway’s (CNI) capex-to-revenue ratio has gone up 1% to 13.3% in the first quarter, from 12.3% in Q1 2017.
After examining major US railroads’ EPS, let’s look now at their operating cash flows in the first quarter. The level of operating cash flow reflects a railroad’s immediate health. Cash flow is a vital factor that enables a company to pay its current expenses. Major components of these expenses include employee costs and servicing of debts. So a railroad’s cash flow statement is an important financial statement for lenders and investors who want to invest in railroad stocks.
In the previous part of this series, we reviewed major US railroads’ operating margins. In this part, we’ll examine their adjusted EPS in the first quarter. Railroads (XLI) with strong track records of managing costs amid higher volumes are rewarded by the market. Their earnings often grow at a rapid pace. Major non-operating costs such as interest also impact railroads’ earnings. Lower taxes due to the Tax Cuts and Jobs Act resulted in far superior earnings growth for railroads with US-specific operations in the first quarter.
Earlier in this series, we looked at first-quarter freight volume growth for the major US railroads (XLI). In this part, we’ll review their operating margin changes for the same quarter. Railroads report operating ratios, which is an important metric for evaluating railroad performance. Operating ratio is the ratio of total operating expenses to revenue. An operating margin is the flip side of an operating ratio. The higher the operating margin, the better the operating efficiency and, in turn, the net margin.
Intermodal is the second-largest revenue source for US railroads (FXR). Intermodal freight haulage involves cargo transportation in an intermodal container using various modes of transportation without handling the cargo itself while switching over modes. Railroads face tough competition from trucking companies in their intermodal operations.
According to the AAR (Association of American Railroads), coal accounted for 32.2% of originated tonnage for Class I railroads (XTN) in the United States. In the previous year, the share was 31.6%, indicating that coal remains a dominant force among all the commodities hauled by these railroads. The association further revealed that coal’s share of their total operating revenues rose from 13.9% in 2016 to 14.8% in 2017, behind only intermodal revenues. Nearly 70% of the coal consumed by US coal-fired power plants is carried by railroads.
In this integrated world, the US–China trade dynamic is sure to affect supply chains, including the US transportation and logistics sector. US Treasury Secretary Steven Mnuchin believes steep tariffs on Chinese merchandise would hurt global supply chains. Yesterday, the Dow Jones Transportation Average (DJT) opened at 10,748.97 and went up to 10,750.88. From that point, it declined to close at 10,448.29, down 0.7% or 73.73 points.
In Week 24, which ended pm June 16, Western US railroad Union Pacific (UNP) registered 1.1% YoY (year-over-year) carload traffic gains. The company moved ~97,400 carloads in that week compared with 96,300 in Week 24 of 2017.
Berkshire Hathaway–owned BNSF Railway’s (BRK.B) carload traffic expanded 5.2% YoY (year-over-year) in Week 24. This Western US rail giant hauled over 101,000 railcars, excluding intermodal, in that week compared with 96,100 units in Week 24 of 2017.
Demand for rail service is dependent on the demand for the products moved by railroads. So, rail traffic is a useful measure to sense the broader economic activity, both for specific industries and for the economy. Every week, the major North American railroads (UNP) submit their traffic data for the previous week to the AAR (Association of American Railroads). AAR publishes this data in its weekly railroad traffic report every Wednesday.
Western US rail giant Union Pacific’s (UNP) carload traffic grew 0.8% YoY (year-over-year) in Week 23, to ~97,500 units from 96,800. UNP’s carload volume growth was substantially lower than rival BNSF Railway’s (BRK.B) double-digit rise of 10.2% YoY, as well as US rail carriers’ (XTN) average rise of 2.8% YoY.
In Week 23, Western US major rail carrier BNSF Railway’s (BRK.B) carload traffic, excluding intermodal, rose 10.2% YoY (year-over-year) to ~103,600 railcars from ~94,000. The railroad’s weekly gains were the highest among Class I US railroads, far higher than competitor Union Pacific’s (UNP) 0.8% YoY rise, and US railroads’ (IYJ) 2.8% YoY rise.
I’ve been keeping an eye on Union Pacific Corporation (NYSE:UNP) because I’m attracted to its fundamentals. Looking at the company as a whole, as a potential stock investment, I believeRead More...