Gee, Union Pacific stock didn't dive like CSX did, instead the stock increased slightly in value..... who knew?
https://www.barrons.com/articles/industrial-stocks-fed-caterpillar-economic-cycle-deere-3m-51563308437
CMStPnPGee, Union Pacific stock didn't dive like CSX did, instead the stock increased slightly in value..... who knew?
Perhaps there is something to be said for not obsessing over OR as a prime performance metric... when you cut or 'discourage' your customer base, you usually cut revenue, and as long as quarterly analysts look at revenue rather than net income you can prepare to be penalized...
Meanwhile, in other potentially rail-related news in the Barron's story ... Caterpillar. TL;DR: this is basically why Barron's likes them:
Shares of Caterpillar (CAT), the leading U.S. machinery maker, have slumped 20%, to $126, this year despite reporting what’s likely to be a 70% rise in earnings. The decline reflects the company’s status as a prime play on the global industrial economy. As Wall Street worries about the outlook for growth, Caterpillar stock has been hit. The shares, as Barron’s noted last week, look inexpensive. They now trade for 10 times projected 2019 earnings of $12.87 and yield 2.7%. The forward P/E has dropped from about 16 at the start of 2018. Caterpillar’s three main divisions—construction, resource industries, and energy—are all reporting higher profits, and mining in particular is benefiting from pent-up demand after many years of slow sales. CEO Jim Umpleby has emphasized “profitable growth,” and the company is aiming to do that with 1% to 4% price increases at the start of 2019. J.P. Morgan analyst Ann Duignan sees a “prolonged up-cycle” for Caterpillar and has an Overweight rating and $188 price target. A trade deal between the U.S. and China would almost certainly boost the stock.'
Overmod CMStPnP Gee, Union Pacific stock didn't dive like CSX did, instead the stock increased slightly in value..... who knew? Perhaps there is something to be said for not obsessing over OR as a prime performance metric... when you cut or 'discourage' your customer base, you usually cut revenue, and as long as quarterly analysts look at revenue rather than net income you can prepare to be penalized...
CMStPnP Gee, Union Pacific stock didn't dive like CSX did, instead the stock increased slightly in value..... who knew?
My 'gut feeling' is that Foote and company following EHH's plan cut too deep into the 'institutional brain trust' and go rid of the pencil sharpeners in the Finance Department that knew the tricks of the trade to see that CSX financials ALWAYS beat the Wall Street estimates. This time the CSX numbers DID NOT beat the street - thus the blood bath.
Never too old to have a happy childhood!
I watch the UNP stock a little more closely (because, basically, that's my 401K at work). Two days ago it fell over ten bucks a share. I still don't know why. Yesterday, it gained all but a buck of that back, and today we have that buck. That 59 operating ratio is very impressive, but they won't be happy with it.
Carl
Railroader Emeritus (practiced railroading for 46 years--and in 2010 I finally got it right!)
CAACSCOCOM--I don't want to behave improperly, so I just won't behave at all. (SM)
CShaveRR I watch the UNP stock a little more closely (because, basically, that's my 401K at work). Two days ago it fell over ten bucks a share. I still don't know why. Yesterday, it gained all but a buck of that back, and today we have that buck. That 59 operating ratio is very impressive, but they won't be happy with it.
The target has been 55 for a long time. Once they reach it, it won't be enough. In the eyes of Wall Street, no matter how low it can get, it will never be enough.
Jeff
jeffhergert The target has been 55 for a long time. Once they reach it, it won't be enough. In the eyes of Wall Street, no matter how low it can get, it will never be enough. Jeff
I worked in the controllership function for a Wall Street bank for more than 8 years. The bank, which was evenually acquired by JPMorgan Chase, had a strong investment department. It was staffed by a small army of Ivy Leageue MBA's.
I never met a reputable Wall Street analyst that hung h/her analysis on one operational and/or financial metric, ie OR, ROE, ROA, etc. They form a composite picture by evaluating and weighing numerous indicators.
JPS1 jeffhergert The target has been 55 for a long time. Once they reach it, it won't be enough. In the eyes of Wall Street, no matter how low it can get, it will never be enough. Jeff I worked in the controllership function for a Wall Street bank for more than 8 years. The bank, which was evenually acquired by JPMorgan Chase, had a strong investment department. It was staffed by a small army of Ivy Leageue MBA's. I never met an reputable Wall Street analyst that hung h/her analysis on one operational and/or financial metric, ie OR, ROE, ROA, etc. They evaluate and weigh numerous indicators.
I never met an reputable Wall Street analyst that hung h/her analysis on one operational and/or financial metric, ie OR, ROE, ROA, etc. They evaluate and weigh numerous indicators.
The world of finance has left reputable far behind. The 2007-2008 Recession and banking crisis was the 'young, best and brightest', 'putting one over' on the stodgey old reputable banking industry - under their own watch. So much for a reputable Wall Street.
The Wall Street 'activist investors' won't be happy even if the OR would somehow go to negative numbers - the negative numbers aren't big enough!!!!!
Maybe somebody on Wall Street likes the Big Boy.
BaltACD The world of finance has left reputable far behind. The 2007-2008 Recession and banking crisis was the 'young, best and brightest', 'putting one over' on the stodgey old reputable banking industry - under their own watch. So much for a reputable Wall Street. The Wall Street 'activist investors' won't be happy even if the OR would somehow go to negative numbers - the negative numbers aren't big enough!!!!!
This brings back memories when TCIF was trying to take over CSX. Their big push was to convert CSX from equity financing to debt financing, cutting investment in ROW, etc. Ironically it was the beginning of the 2007 recession that stopped the takeover.
Focusing solely on meeting next quarters numbers is not a good way to run a railroad.
Erik_Mag Focusing solely on meeting next quarters numbers is not a good way to run a railroad.
BaltACD JPS1 jeffhergert The target has been 55 for a long time. Once they reach it, it won't be enough. In the eyes of Wall Street, no matter how low it can get, it will never be enough. Jeff I worked in the controllership function for a Wall Street bank for more than 8 years. The bank, which was evenually acquired by JPMorgan Chase, had a strong investment department. It was staffed by a small army of Ivy Leageue MBA's. I never met an reputable Wall Street analyst that hung h/her analysis on one operational and/or financial metric, ie OR, ROE, ROA, etc. They evaluate and weigh numerous indicators. The world of finance has left reputable far behind. The 2007-2008 Recession and banking crisis was the 'young, best and brightest', 'putting one over' on the stodgey old reputable banking industry - under their own watch. So much for a reputable Wall Street. The Wall Street 'activist investors' won't be happy even if the OR would somehow go to negative numbers - the negative numbers aren't big enough!!!!!
Why not start a Sour Grapes Forum?
CMStPnP Gee, Union Pacific stock didn't dive like CSX did,
Gee, Union Pacific stock didn't dive like CSX did,
Wow, for someone who claims to be a long term investor, you sure are hung up on a one time swing. Trolling as usual.
An "expensive model collector"
charlie hebdo BaltACD JPS1 jeffhergert The target has been 55 for a long time. Once they reach it, it won't be enough. In the eyes of Wall Street, no matter how low it can get, it will never be enough. Jeff I worked in the controllership function for a Wall Street bank for more than 8 years. The bank, which was evenually acquired by JPMorgan Chase, had a strong investment department. It was staffed by a small army of Ivy Leageue MBA's. I never met an reputable Wall Street analyst that hung h/her analysis on one operational and/or financial metric, ie OR, ROE, ROA, etc. They evaluate and weigh numerous indicators. The world of finance has left reputable far behind. The 2007-2008 Recession and banking crisis was the 'young, best and brightest', 'putting one over' on the stodgey old reputable banking industry - under their own watch. So much for a reputable Wall Street. The Wall Street 'activist investors' won't be happy even if the OR would somehow go to negative numbers - the negative numbers aren't big enough!!!!! Why not start a Sour Grapes Forum?
Too bad you can't see the forest for the trees!
Despite all the fuel that is being dumped on the economy - when the bottom falls out it is going down and making 2007-2008 look like a walk in the park.
charlie hebdoWhy not start a Sour Grapes Forum?
BaltACDThe world of finance has left reputable far behind. The 2007-2008 Recession and banking crisis was the 'young, best and brightest', 'putting one over' on the stodgey old reputable banking industry - under their own watch. So much for a reputable Wall Street.
Nope, banks were not involved.
I think you meant to say Stock Brokerage Firms and several went out of business from what I remember. Also it was bad mortgages sliced up into smaller amounts and recombined into a derivative investment vehicle sold by investment firms NOT by Banks. Most of the American Banks knew better and were regulated not to get involved in that crap. One day junk bonds will bite investment houses as well. They have been lucky so far.
n012944Wow, for someone who claims to be a long term investor, you sure are hung up on a one time swing.
I have an extra napkin for the egg on your face.....lol.
CMStPnP BaltACD The world of finance has left reputable far behind. The 2007-2008 Recession and banking crisis was the 'young, best and brightest', 'putting one over' on the stodgey old reputable banking industry - under their own watch. So much for a reputable Wall Street. Nope, banks were not involved. I think you meant to say Stock Brokerage Firms and several went out of business from what I remember. Also it was bad mortgages sliced up into smaller amounts and recombined into a derivative investment vehicle sold by investment firms NOT by Banks. Most of the American Banks knew better and were regulated not to get involved in that crap. One day junk bonds will bite investment houses as well. They have been lucky so far.
BaltACD The world of finance has left reputable far behind. The 2007-2008 Recession and banking crisis was the 'young, best and brightest', 'putting one over' on the stodgey old reputable banking industry - under their own watch. So much for a reputable Wall Street.
As I recall 'my bank' Bank of America was sucking big time for the gullibility in purchasing 'Credit Default Swaps' as a good grade of investment (NOT). The banks that bought into the BS were deemed 'too big to fail' and were bailed out with tax money.
zardoz charlie hebdo Why not start a Sour Grapes Forum? OK
charlie hebdo Why not start a Sour Grapes Forum?
OK
+1
CSSHEGEWISCH Erik_Mag Focusing solely on meeting next quarters numbers is not a good way to run a railroad. It's not a good way to run any business.
True, but it can be especially bad for a capital intensive business with a cyclical business. Things get even worse with an emphasis on debt financing, where a short downturn can drive a debt loaded company to bankruptcy.
BaltACDAs I recall 'my bank' Bank of America was sucking big time for the gullibility in purchasing 'Credit Default Swaps' as a good grade of investment (NOT). The banks that bought into the BS were deemed 'too big to fail' and were bailed out with tax money.
Unfortunately, I believe some banks via their investment arms got sucked into it though I do not think it was the bank business by itself. For example, Bank of America had the great misfortune to buy Countrywide Mortgage prior to the collapse which was one of the major packagers of such derivatives. BoA, I believe claimed after the collapse that Countrywide Mortgage hid it's involvement in the packaging of such derivatives such that BoA wasn't aware of what it got itself into until after the purchase in 2007. I seem to remember that was part of their excuse but one can never really be sure. After the crises they lobbied hard to keep the business which would seem to invalidate their earlier claims on Countrywide and not knowing.
BoA itself stopped creating the derivatives in 2001, long before the crisis erupted and long before the markets got ridiculously large. Because it was a congolmerate of several financial companies including several major credit card operations and investment firms.......yes they got pulled into it BUT not necessarily by the banking end, in my view....if one believes at least part of their story. CITIGROUP, in my opinion was much more of a Credit Card and Finance Company than a bank.
CMStPnP BaltACD As I recall 'my bank' Bank of America was sucking big time for the gullibility in purchasing 'Credit Default Swaps' as a good grade of investment (NOT). The banks that bought into the BS were deemed 'too big to fail' and were bailed out with tax money. Unfortunately, I believe some banks via their investment arms got sucked into it though I do not think it was the bank business by itself. For example, Bank of America had the great misfortune to buy Countrywide Mortgage prior to the collapse which was one of the major packagers of such derivatives. BoA, I believe claimed after the collapse that Countrywide Mortgage hid it's involvement in the packaging of such derivatives such that BoA wasn't aware of what it got itself into until after the purchase in 2007. I seem to remember that was part of their excuse but one can never really be sure. After the crises they lobbied hard to keep the business which would seem to invalidate their earlier claims on Countrywide and not knowing. BoA itself stopped creating the derivatives in 2001, long before the crisis erupted and long before the markets got ridiculously large. Because it was a congolmerate of several financial companies including several major credit card operations and investment firms.......yes they got pulled into it BUT not necessarily by the banking end, in my view....if one believes at least part of their story. CITIGROUP, in my opinion was much more of a Credit Card and Finance Company than a bank.
BaltACD As I recall 'my bank' Bank of America was sucking big time for the gullibility in purchasing 'Credit Default Swaps' as a good grade of investment (NOT). The banks that bought into the BS were deemed 'too big to fail' and were bailed out with tax money.
Banks are the sum of their parts - any part that is poorly managed and/or supervised has the potential to bring the whole thing down. Not all bank robbers use guns.
Thinking about it, I think the OP's original title should read, "Union Pacific Earnings show why revenue and volume doesn't really matter."
https://www.railwayage.com/freight/class-i/up-2q19-record-low-or-despite-volume-revenue-declines/?utm_source=&utm_medium=email&utm_campaign=5097
CMStPnP n012944 Wow, for someone who claims to be a long term investor, you sure are hung up on a one time swing. I have an extra napkin for the egg on your face.....lol.
n012944 Wow, for someone who claims to be a long term investor, you sure are hung up on a one time swing.
Is it left over from your failed restaurant?
n012944 CMStPnP n012944 Wow, for someone who claims to be a long term investor, you sure are hung up on a one time swing. I have an extra napkin for the egg on your face.....lol. Is it left over from your failed restaurant?
http://cs.trains.com/trn/f/111/t/276961.aspx
jeffhergertThinking about it, I think the OP's original title should read, "Union Pacific Earnings show why revenue and volume doesn't really matter."
Everyone in the Class I category took a 5% or below drop in traffic. At this point it is not a significant drop. UP managed to hold it to 4% drop despite being heavily impacted by flooding. Which I think is pretty good. We'll see if the industry continues with the decline or bounces back next year.
Of course trucking is now experiencing a 3% decline.....so I am not sure it is related to PSR, I think it is economic. BNSF hasn't implemented PSR and it's traffic decline was still more than UP's.
https://wolfstreet.com/2019/05/14/trucking-and-rail-apply-brakes-as-volume-sinks/
Compared to 2015 to 2017 it is not as steep a fall off in traffic.
CMStPnP jeffhergert Thinking about it, I think the OP's original title should read, "Union Pacific Earnings show why revenue and volume doesn't really matter." Everyone in the Class I category took a 5% or below drop in traffic. At this point it is not a significant drop. UP managed to hold it to 4% drop despite being heavily impacted by flooding. Which I think is pretty good. We'll see if the industry continues with the decline or bounces back next year. Of course trucking is now experiencing a 3% decline.....so I am not sure it is related to PSR, I think it is economic. BNSF hasn't implemented PSR and it's traffic decline was still more than UP's. https://wolfstreet.com/2019/05/14/trucking-and-rail-apply-brakes-as-volume-sinks/ Compared to 2015 to 2017 it is not as steep a fall off in traffic.
jeffhergert Thinking about it, I think the OP's original title should read, "Union Pacific Earnings show why revenue and volume doesn't really matter."
Your title implies that only reduced coal traffic doesn't matter to make record earnings. I'm saying that in reality, reduced overall traffic and revenue didn't seem to matter, they still had record numbers.
But they achieved that mostly by cutting their way to them. How long can that continue? Eventually, their cutting will come back to bite them in the backside. I'm not talking about long trains or closed yards. I'm talking about the cutting of mechanical, signal and maybe maintenance of way forces. (I do know the cuts that have been made in the mechanical and signal forces, not as sure about the MOW people.) Many of the cuts have nothing to do with reduced volume or equipment, and more cuts are coming.
jeffhergertBut they achieved that mostly by cutting their way to them. How long can that continue? Eventually, their cutting will come back to bite them in the backside. I'm not talking about long trains or closed yards. I'm talking about the cutting of mechanical, signal and maybe maintenance of way forces. (I do know the cuts that have been made in the mechanical and signal forces, not as sure about the MOW people.) Many of the cuts have nothing to do with reduced volume or equipment, and more cuts are coming. Jeff
What profits the 'PSR' carriers are showing are coming from these kinds of cuts - cuts, that in time will bite the carrier in the financial postier - aka PRR & NYC and then Penn Central......
But the Hedge Funds and Wall Street love it.
jeffhergertYour title implies that only reduced coal traffic doesn't matter to make record earnings. I'm saying that in reality, reduced overall traffic and revenue didn't seem to matter, they still had record numbers. But they achieved that mostly by cutting their way to them. How long can that continue? Eventually, their cutting will come back to bite them in the backside. I'm not talking about long trains or closed yards. I'm talking about the cutting of mechanical, signal and maybe maintenance of way forces. (I do know the cuts that have been made in the mechanical and signal forces, not as sure about the MOW people.) Many of the cuts have nothing to do with reduced volume or equipment, and more cuts are coming. Jeff
Initially when those cuts are first made most investors do not pay any attention to them but I do not think that stays the case. Investors trust what the railroad management says unless facts prove otherwise. Case of CSX, when I held the stock investors lost confidence in the management team and that is exactly why you saw various schemes to "rescue" CSX from itself. The lack of confidence was caused by predictions of a turnaround by management year after year that never really came to fruition. One reason that despite the loose talk I can never see UP having any interest in CSX. Just my hunch perhaps they are attempting to scare a competitor into a protective merger but who knows I could be misreading the situation and I don't have a magical 8 ball myself.
As far as MOW forces, too far in the weeds for me to know what is going on there. Maybe UP intends to contract more of that out to other firms? Maybe the reached a point of pausing for a year or two on large MOW projects? Beats me a only time will tell or reveal why they felt the need to cut there. Mechanical? Is there a locomotive shortage or surplus now.....again I do not monitor down to that detail and would need more info which I will probably never get publicly from UP on the matter.
I look at past performance and future projections of performance in regards to earnings, dividends and capital position of the stock. Stock price is directly related to net earnings plus dividends plus future projections of each. If you cut one or the other at some future data point, the stock will fall in value. So far the investor analysis service I subscribe to says at worst UP stock is a HOLD and at best a BUY. The day trading sites are like reeds in the wind of course BUY this week, SELL the next, HOLD the third week, etc. Thats why I pay $110 a year for an analysis service and then spend time looking at their picks. I don't have the time to prequalify stocks I invest in right off the NYSE ticker and to be honest I am not smart enough too. Basically most good sales departments work that way, they start from pre-qualified sales vs starting from cold calling or knocking on doors.
BaltACDPRR & NYC and then Penn Central
Those two railroads were in trouble long before their merger and they both knew it and it was one reason why they sought salvation from each other. The pile on effect from an increasingly paniced ICC or whatever regulatory arm forced them to take NH and other shakey carriers sealed their fate quicker but even without the forced inclusions. The PRR and NYC management teams hated each other and business culture wise the merger was a disaster as well after the merger the railroad management teams really did not consolidate into one team. Best book to read on that was "The wreck of the Penn Central". You know at one point they were flying hookers around the NE using the PC's fleet of business jets to raise money......according to the book. I don't think that was intended but apparently it happened at some point. Other unsubstantiated rumors in the book about the Southern railway pilfering cars from the PC and repainting them into Southern railway paint without permission to secure debt. Now some of what is in the book is probably untrue but it makes for some entertaining reading of a large Corporation losing it's grasp and well for that matter......asset management.
There was a lot more going on with PC that was just wrong than deferred maintenence or wanting to keep cutting costs.
CMStPnP BaltACD PRR & NYC and then Penn Central Those two railroads were in trouble long before their merger and they both knew it and it was one reason why they sought salvation from each other. There was a lot more going on with PC that was just wrong than deferred maintenence or wanting to keep cutting costs.
BaltACD PRR & NYC and then Penn Central
Those two railroads were in trouble long before their merger and they both knew it and it was one reason why they sought salvation from each other.
Their troubles are the reasons they started maintenance shorting - no matter why a company starts shorting on maintenance it starts the company on a very slippery slope - a slope that can be next to impossible to get stopped on.
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