Non-Tech
|
|
Railroad industry: Freight railroads/rail supply companies
|
| An SI Board Since August 1998 |
| Posts |
SubjectMarks |
Bans |
| 13 |
2 |
0
|
|
I'm going to start a thread titled "railroad industry" to see if there is any general interest in this subject. The thread titled "All Aboard - Everything About Railroads and Toy Trains" seems to have attracted mainly folks with an interest in passenger trains, rail history, model railroading, etc. Nothing wrong with that (I share all of the above interests) but I think for the sake of clarity it might help if there were a separate thread devoted to the freight side of the business - aside from discussions of specific companies like UNP and FLA.
To get the ball rolling, I'll throw out the names of three companies that I think are relatively promising at this juncture: Burlington Northern Santa Fe (BNI), Canadian National (CNI) and MotivePower Industries (MPO).
BNI is way ahead of UNP, CSX and NSC as far as merger progress is concerned. Rob Krebs is a dynamic CEO who challenges his managers to find ways to grow the business. As an indication of the company's optimism about growth, BNI will buy 475 new locomotives in 1999 and by the end of the year one in three of the company's locomotives will be four years old or less.
CNI is on its way to creating a true Nafta railroad, between its pending acquisition of Illinois Central and its marketing alliance with Kansas City Southern. Chief operating officer Hunter Harrison, who arrived from Illinois Central earlier this year, is preparing to implement a new operating plan that (he says) will reduce CNI's locomotive requirements by as much as one third.
MPO is positioned to benefit from the deferred maintenance in the North American locomotive fleet as well as from the exclusive focus of GM and GE on high-horsepower machines. MPO overhauls and rebuilds locomotives of all types and also builds new units in the up-to-4000 hp range. MPO also produces locomotive components, and it has a strong presence in Mexico. Chairman Jack Pope reiterates at every quarterly earnings conference that the target is 15% annual EPS growth, but the last several quarters have far exceeded that target.
The industry's challenges include the fact that it is inherently cyclical, that despite years of cost-cutting most companies still don't have anything resembling free cash flow, and that "high-quality rail service" remains an oxymoron. UNP's Gulf Coast problems of the past year were, unfortunately, not an aberration, but a case of the industry's long-standing weaknesses being magnified by some poor management decisions and a surfeit of business. Still, railroads remain (and will continue to be) a cornerstone of the economy and rail technology has tremendous potential for efficient movement of freight.
What say you?
Tom Murray
|
|
|
