One of Our Railroad Companies Sees An Increase of 3.9% in Only Two Days

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We’re back to look more closely at our three companies in the transportation sector. We mentioned on Monday that this sector is made up of companies that move raw materials, intermediate goods and finalized products via land, air and sea. Plus, companies are now looking to make the entire process easier for their clients and include warehousing and other logistics add-ons.

But this industry is not as simple as it once was. Technology is making sure of that and transportation is no different. Just think about how long it takes for something to get from the Amazon warehouse to your door. Just a few years ago, we were amazing that we could order something online and it would arrive in 7-10 days. Now, we can get almost anything on Amazon Prime in just two days. A lot of things can be delivered next day…or sometimes within a matter of hours.

That expectation has an impact on this entire industry of shipping and logistics. This is going to mean investing in new technologies and improvements in supply chain…or it’s going to mean becoming obsolete. And we can’t help but wonder if railroad companies will be able to keep up with companies such as Uber Freight. Yes, companies can go on Uber Freight and get quotes for deliveries and track them in real time.

It’s an exciting and strange time to be alive…and definitely an interesting time to be investing. Noticing this trend gives us something else to look for when we look at earnings releases. We want to see if the company is making investments in technology…or if it’s planning on doing the same old thing.

Let’s get right into those numbers…

First up, we’ve got C.H. Robinson Worldwide, Inc. (CHRW). C.H. Robinson is once of the world’s largest third-party logistic providers. It has over 124,000 customers and has been in the industry for over 100 years. No matter what its customers need, the company believes in seamless delivery and integration.

The company reported its second-quarter earnings at the end of July. For the quarter, net revenues increased 3.5% when compared to the same quarter of the previous year. However, total revenues decreased 8.6%. That was due to a combination of lower pricing and a 3.4% increase in operating expenses.

The North America segment saw truckload volumes decrease by 2.5% in the quarter and intermodal volumes decline 30.5%. This might just be an indication of what we mentioned above. Can we really afford to ship via truck and intermodal if the customers are expected their items overnight?

The management expects this “soft freight” environment to continue through the balance of 2019. So, there are no changes to the outlook for the rest of the year.

Shares opened Monday at $83.38 and closed yesterday at $86.69. That’s an increase of 3.9%. over the first 48 hours of the trading week.

Next up, we’ve got Canadian National Railway Company (CNI). Canadian National Railway Company is the leading North American transportation and logistics company with the goal to deliver the goods that keep the economy rolling.

The company announced the second quarter results at the end of July. Revenues increased 9% when compared to the same quarter for the previous year. This was despite the increase in operating expenses by 8%. Some of the contributing factors were freight rate increases and higher volumes in crude oil.

The management still aims for 2019 EPS growth in the low double-digit range when compared to last year. And it still expects to see mid-single-digit volume growth in terms of revenue ton miles.

Shares opened Monday at $92.37 and closed yesterday at $93.15. That’s an increase of 0.8% so we’ll call that basically flat.

Finally, we’ve got Genesee & Wyoming Inc. (GWR). Genesee & Wyoming Inc. owns of leases 120 freight railroads worldwide with 8,000 employees.

In July, GWR announced that it has been acquired by Brookfield Infrastructure and GIC in a $8.4 billion deal. The $112 per share offer is a 40% premium compares to the trading price on March 8, which was the day the rumors of the deal started flying.

The company announced its first quarter earnings at the end of April. Although the company saw operating revenue decrease by 2.9% when compared to the first quarter of the previous year, the management spent that quarter implementing several cost reduction initiatives.

When broken down by segment, the Australia segment saw operating revenues decrease 13% and the U.K/Europe segment saw operating revenues decrease 7.8%. The North American segment was the only segment to see an increase in operating revenues, but it wasn’t enough to balance out the losses of the other two at only 2.1%.

We didn’t see numbers for the second quarter, which makes sense because once the acquisition happens, GWR will become a privately held company. So as exciting as all the growth opportunities are, it’s really too late for investors to profit from here.

Shares opened Monday $110.79 and closed yesterday at $110.74. We’ll call that basically flat. And as we mentioned last time, we look at GWR, we don’t expect too much movement since the buyout is set for $112.

We’ll check back in on Saturday to see if C.H. Robinson can keep its momentum for the rest of the week.

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