(The following appeared on the National Post website on October 30.)
OTTAWA — With the earnings season behind them, the results of North America’s top tier railway appear to have impressed UBS analyst Rick Paterson. “The North American rails just completed one of the best quarters we’ve ever seen – particularly in relation to the economic environment –with the big four U.S. rails averaging 37% [earnings per share] growth [year over year],” he said.
Big gains were at Canadian National Railway Co. and Kansas City Southern, which saw their earnings increase 14% and 9% respectively during the third quarter alone. Norfolk Southern Corp. and Burlington Northern Santa Fe Corp. both had “big beats,” he said. Although both Union Pacific Corp. and CSX Corp. had raised their guidance rather than keeping a “stale” one, he noted.
“Admittedly, accelerating EPS growth was powered to a degree by falling fuel prices, and with the continuing pullback in oil we expect more of the same in Q4,” Mr. Paterson said. “As we see it: get long rails.”
Canadian Pacific Railway Ltd. was the only major railway to report a slip in earnings, down 2% year over year.
Canadian volumes took a major tumble in the week 43 of 2008, with carloads down 10% with every commodity group lower led by auto [-33%], paper and forestry [10%] and coal [-10%]. U.S. volumes were down 4.3% year over year last week.