Western Railroad Discussion > UP: Brazos stopped, Hinkle + Pine Bluff humps to close

Lance Fritz confirms details to the Wall Street Journal 

Flat switching to continue in Hinkle and Pine Bluff

Paywall:  https://www.wsj.com/articles/union-pacific-halts-550-million-texas-project-11555610639

The old "downsizing oneself into prosperity" technique.  

So I guess this means that all the officials who, just a few months ago, said that the new Brazos Yard was so necessary for the future success of UP in Texas and the Southeast were just blowing smoke up a certain body cavity?   

Stop construction on a new yard, putting new power in storage, as a stock holder I must say union pacific seems to have lost their way.

Posted from Android

The-late-EMD Wrote:
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> Stop construction on a new yard, putting new power
> in storage, as a stock holder I must say union
> pacific seems to have lost their way.
>
> Posted from Android

Well Vena and Fritz don't think so. More likely they won't go after any business unless it provides a 3% or greater return.

Meanwhile plans to downgrade Davidson Yard in FW were
scrapped...



Allen



Edited 1 time(s). Last edit at 04/18/19 15:11 by bradleymckay.

I was amazed to see them report 1900 locomotives stored - that's approximately 20% of their roster isn't it? PSR can be a bit of smokescreen in front of the fact that volumes actually are lower. As posted, the carloadings for the last couple weeks have been in the dumps relative to 2018 levels. But again, that's probably screened by PSR as they've given up on business they don't see as profitable enough. Another interesting takeaway from the earnings report is how their Debt/EBIDTA ratio continues to creep up. Decreasing your earnings obviously isn't going to help, but clearly the corporation has taken the approach of buying stock back and increasing the price per share rather than try to cut down debt load. 

One of the things that should be on the railroad's radar is the IMHO sulfur rules getting ready to take effect 1/1/20. Essentially this is going to make bunker fuels for marine applications much more like regular-old-diesel fuel. I imagine that fuel prices are going to be much higher in Q4-19/Q1-20 than this past period, no doubt cutting into profitability and operating ratios in the next 12 months.

Kyle Rasmussen
Centerville, UT

The-late-EMD Wrote:
-------------------------------------------------------
> Stop construction on a new yard, putting new power
> in storage, as a stock holder I must say union
> pacific seems to have lost their way.
>
> Posted from Android

May have lost their way, but your  stock went up 4.36% today,  reaching $177/share. 

CA_Sou_MA_Agent Wrote:
-------------------------------------------------------
> The old "downsizing oneself into prosperity"
> technique.  
>
> So I guess this means that all the officials who,
> just a few months ago, said that the new Brazos
> Yard was so necessary for the future success of UP
> in Texas and the Southeast were just blowing smoke
> up a certain body cavity?   

Yes, the modern version of "shrink to survive (by cannibalism)".

AA

Stanford White
Carmel Valley, CA

From the earnings call, slide 14 commentarySlide 14 highlights some of the recent network changes including our initial terminal rationalization results. We stopped pumping (sic) cars at Hinkle and Pine Bluff and curtailed yard operations in Salt Lake City, the Kansas City complex and Butler Yard in Wisconsin to name a few.And we continue to look for additional rationalization opportunities. For example, we have multiple intermodal facilities in the Chicago complex, which provides an opportunity to reduce operational complexity while improving our service.

 

kyrasmus Wrote:
------------------------------------------------------- As
> posted, the carloadings for the last couple weeks
> have been in the dumps relative to 2018 levels.

>
> Kyle Rasmussen
> Centerville, UT

I posted the carloading info yesterday and, except for frac sand, carloadings are not in the dumps. Total is down 1% for the year. UP has been hurt by Permian Basin oil producers who have gravitated toward using sand from new west Texas sand mines for about a third of the sand used in the fracking process. The carload loss has been substantial...UP is no longer moving large amounts of frac sand from the upper Midwest to west Texas on a constant basis. It now ebbs and flows depending on the week.

Increasing petroleum traffic has helped to take the sting out of lower sand traffic but has not up the loss.

Allen

Posted from Android



Edited 3 time(s). Last edit at 04/18/19 19:18 by bradleymckay.

I guess I didn’t dig into the numbers too deep, just saw the trend in Slide 4 of the earnings release:

https://www.up.com/cs/groups/public/@uprr/@investor/documents/investordocuments/pdf_up_1q19_er_slides.pdf

Just looks like the red line for 2019 loadings is nose-diving

I hope UP is not working on a 3% margin on freight revenues.   They should be pricing for a 25% margin above fully allocated costs.  Any less is suicidal.

Norm

Norman Orfall
Helendale, CA
TIOGA PASS, a private railcar

utwazoo Wrote:
-------------------------------------------------------
> May have lost their way, but your  stock went up
> 4.36% today,  reaching $177/share. 

The price didn't change much during the trading session. It "gapped up" pre-market. It's off topic and can be a long-winded discussion, so I'll spare that, but today's action favored sellers since most buyers wouldn't have been able to take advantage of the price hike unless they bought beforehand, like yesterday, last year, 10 years ago, and so forth.

I wouldn't let one day's price action determine the discussions on where the railroad is going long term. Anyway, the good news is that daytraders didn't make much money on UNP today.

Lackawanna484 Wrote:
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> And we continue to
> look for additional rationalization opportunities.
> For example, we have multiple intermodal
> facilities in the Chicago complex, which provides
> an opportunity to reduce operational complexity
> while improving our service.
>

Rationalization of Chicago-area ramps is the wrong way to go, if they are thinking in terms of selling off without spending the money directly on expansion.  The only exception I can think of is if Western Avenue is still in operation, it makes sense to sell that and pocket the money and use it for expansion elsewhere – that is one facility that makes no sense and the land value far exceeds any capacity/proximity value.  The land sale – assuming there is not a huge environmental clean-up liability, would pay for a lot more land plus improvements at Global 2. 
 
Global 1 could be sold, IF land was purchased (or should I say re-purchased) around Global 2 on both the north and south sides to expand and consolidate 1 and 2 into one larger operation at 2.  Global 2 is better situated for highway access and proximity to close-in industrial users, and the land costs are lower.  Two caveats to that: adjacency Global 1 might offer for last-mile / fulfillment, which is possible given the urban core value trending on projects I’m involved with on the West Coast. The opportunities for that are large, IF service is oriented that way and IF the major players view those in-close facilities as being fed by out-of-the-area regional and national DCs rather than feeding off a local DCs (ie: such as Global 4 area). So far on my projects that looks like about a 30/70 mix, but it is a rapidly-evolving model so I don’t have an accurate feel on the future. The other caveat would be that at some point UP merges/acquires/is acquired by NS or CSX and can pick up an east-side major ramp, or operate out of one of the larger NS/CSX ramps (a swapping of lifts based on markets served). That could be a major reset on Chicago-area ramps.  
 
Regardless, any “consolidation” of intermodal ramps should be done in the context of both streamlining operations AND expanding capacity and service offerings.  Otherwise it is indeed a form of self-cannibalism trading short-term profitability and Wall Street pleasing for long-term market share and viability. The non-bulk, non-automotive, non-niche product growth of railroading is domestic intermodal, and terminal capacity and location are/will be critical. 
 
UP has already made intermodal land/terminal errors in the Inland Empire of the LA Basin and the Seattle-Tacoma area. My own opinion, perhaps not widely shared, is that they have also done so in urban areas that are extremely unbalanced lanes even for trucking: Denver and Phoenix.  Yet the goods need to get into the markets, and corporate truckers are figuring out how to push out the gypsy truckers from those markets.  And LTL, primarily corporate trucking, is still there and won’t go away.  Let’s hope UP doesn’t shoot itself in the foot in a key market like Chicago. 

Bruce
 



Edited 1 time(s). Last edit at 04/19/19 08:28 by StStephen.

The gypsy truckers and some owner operators are being hampered by the electronic logbook rules, too.

That levels the playing field a little.

Posted from Android

rantoul Wrote:
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> If the Chicago intermodal rationalization is true,
> then the recent NS -UP deal makes sense.
>
> https://www.trainorders.com/discussion/read.php?1,
> 4770629

It makes a lot of sense to run through Chicago with cargo bound for farther east.  Robert R Young would be proud.

Next, they'll be looking at the Kankakee Belt, TP&W, etc.  Everything old is new again