October 24, 2014

Railroads 2010: How sweet it was

How did major railroads perform in 2010?

Reviewing their calendar-year and fourth-quarter profit statements, one wouldn’t know they were operating in the midst of a nationwide recession.

Profits soared, stock dividends were raised and operating ratios improved. (Operating ratio — a railroad’s operating expenses expressed as a percentage of operating revenue — is considered by economists to be the basic measure of carrier profitability.)

Wall Street analyst Ed Wolfe reports the level of freight car and intermodal loadings for the year registered “the best” year-over-year growth in more than 50 years.

Wolfe and other analysts also point to the railroads’ pricing strength — the ability to raise rates on shippers with limited effective alternatives to railroad transportation. Many long-term contracts for hauling coal are expiring, and substantial rate increases on that traffic already are reflected in new contracts.

Indeed, railroad CEOs are predicting another strongly profitable year in 2011, which was reflected in year-end railroad stock prices, which were flirting with record highs.

Following are profit reports from the major railroads:

 Canadian National:

  • Fourth-quarter profit increased 19 percent.
  • Calendar-year 2010 profit increased 13.5 percent.
  • Operating ratio improved four percentage points to 63.6.
  • The stock dividend was raised 20 percent.
  • The year-end stock price was up 38 percent. Analysts predict CN’s stock price will rise another 4 percent in 2011.

 Canadian Pacific:

  • Fourth-quarter profit increased 34 percent.
  • Calendar-year 2010 profit increased 39 percent.
  • Operating ratio improved four percentage points to 77.6.
  • The stock dividend was raised 9 percent.
  • The year-end stock price was up 45 percent. Analysts predict CP’s stock price will rise another 8 percent in 2011.

 CSX:

  • Fourth-quarter profit increased 46 percent.
  • Calendar-year 2010 profit increased 35 percent.
  • Operating ratio improved four percentage points to 71.1.
  • The stock dividend was raised 26 percent.
  • The year-end stock price was up 62 percent. Analysts predict CSX’s stock price will rise another 6 percent in 2011.

 Kansas City Southern:

  • Fourth-quarter profit increased 47 percent.
  • Calendar-year 2010 profit increased 82 percent.
  • Operating ratio improved 8.8 percentage points to 73.2.
  • The year-end stock price was up 74 percent. Analysts predict KCS’s stock price will rise another 7 percent in 2011.

 Norfolk Southern:

  • Fourth-quarter profit increased 31 percent.
  • Calendar-year 2010 profit increased 45 percent.
  • Operating ratio improved 5 percentage points to 71.9.
  • The stock dividend was raised 11 percent.
  • The year-end stock price was up 41 percent. Analysts predict NS’s stock price will rise another 8 percent in 2011.

 Union Pacific:

  • Fourth-quarter profit increased 31 percent.
  • Calendar-year 2010 profit increased 47 percent. UP Chairman Jim Young said 2010 was the “most profitable year in Union Pacific’s nearly 150-year history.”
  • Operating ratio improved 5.5 percentage points to 70.6.
  • The stock dividend was raised 40 percent.
  • The year-end stock price was up 60 percent. Analysts predict UP’s stock price will rise another 8 percent in 2011.

 BNSF:

As BNSF is now privately held, it no longer reports detailed financial data.