Greetings;
“It’s labor, labor, labor – all I hear about is labor!”
Jan Brady, reflecting on the supply chain crisis
The first two rails to report Q1/22 earnings provide sound Bites for both sides! Both CSX and Union Pacific – the rail’s top-of-the-order hitters for Q1/22 earnings, did well enough from a financial perspective – both modestly beatings Street expectations. Both deeply acknowledged their service issues, which were legion and showed up in the metrics (across the network – train speeds down ~10%, and dwell up 12% despite volumes down about 4%. And, both pointed to labor shortages as the root cause and both defended PSR as a helpful change agent, part of the solution not the cause of the problem (that will cause some fireworks tomorrow!). Both, led by CSX, made offers to pre-pay anticipated raises to labor during the ongoing negotiations, which seems like a timely and even….generous move in a time of shortage and politics showing that, if pressed, railroads can read the room (see attached). Both pointed out big training call pipeline (CSX up 29% sequentially), and a 2H plan to move the new T&E folks from training (cost0 to the field (revenue).
But (but?) both rails reduced (i.e.; bought back) shares(by 4% and 5% respectively – well within their rights but anathema to the Kamerades at the STB), talked to varying degrees about OR even as they tried to talk sequential improvement in labor and thus operations in the near future.
But there were some green shoots at both carriers – notably domestic intermodal, the most important commodity for Future Rail Growth…..and in CSX’s intermodal TPC (below). UNP showed 11% volume growth in Industrial Products which was impressive, and within Premium, automotive parts pushed the auto sub-init volumes up 6% while finished vehicles were down – only – 3%. That may well indicate that for rails and autos, the cavalry is one the way.
Anthony B. Hatch
abh consulting
http://www.abhatchconsulting.com
anthonybhatch@gmail.com
Twitter @ABHatch18