Railroad Performance Better Than Expected

At least on the financial front, Class 1 railroads are outperforming expectations. Burlington Northern Santa Fe (Fort Worth, Texas, www.bnsf.com) saw its revenues increase 19% and revenue per ton-mile rise 9% in the third quarter. Coal, intermodal and agricultural products provided the bulk of the volume growth in the quarter. With a 6.3% year-over-year increase in gross ton miles, locomotive velocity improved 0.6% and car velocity improved 4.2%. On-time performance in the mostly intermodal consumer segment improved to 78.9%.

Canadian National Railway Company (Montreal, www.cn.ca) achieved record margins, reporting a 57.4 operating ratio for the third quarter. Solid volume growth, strong pricing, and improved operations, contributed, said equity analyst Stifel Nicolaus, St. Louis. Intermodal achieved 14% revenue growth, 9% unit growth and also grew pricing by 5%.

Canadian Pacific Railway Ltd. (Calgary, Alberta, www.cpr.ca) reported a third-quarter operating ratio of 74.2 and an exchange-adjusted revenue growth of 7%. That was achieved entirely on price and fuel surcharges, not on volume growth.

CSX Corp. (Jacksonville, Fla., www.csx.com) reported that surface transportation revenues increased 14% in the third quarter to $2.4 billion. This was a result of a 12% improvement in revenue per unit and a 2% increase in units hauled. Strong agriculture volume, up 16%, was a major factor. Intermodal increased 4% as the company completed the culling of marginal traffic, reported Stifel Nicolaus.

Norfolk Southern Corp. (Norfolk, Va., www.nscorp.com) achieved 13% revenue growth (to $1.28 billion) in the third quarter despite flat traffic growth. About 40% of the revenue growth was attributed to incremental fuel surcharge and favorable traffic mix and 60% to price increases.

Union Pacific Corp. (Omaha, Neb., www.up.com) increased revenues 15% in the third quarter to $3.8 billion based on 3% volume growth and 13% unit revenue growth. A 1% drag on revenue growth resulted from an unfavorable shift in traffic mix. UP's operating ratio was 81.1 vs. 86.1 for the same period in 2005.