Ask The Experts: July 31, 2019

Tony Hatch
Independent Transportation Analyst and Consultant

Q: How has Norfolk Southern (NS) been performing?
NS service appears to be improving most rapidly – and this is before they install their new Op/Plan (“Top 21”), on top of the completed “Clean-Sheeting” bottoms-up process. I wonder if in many ways that this is a sort of re-tightening of their once-renowned operating discipline (remembering their late COO Steve Tobias). I think I do need to hear more about their marketing plans and Intermodal’s role given their longtime growth leadership in that segment. There has been a lot of discussion about NS’ “Yield Up” policy – it was noted that in terms of yield (revenue/unit – which is really not price) NSC has like a 20-30% gap to CSX – 23% in 2018, although grew carloads 14% more. Will we see a reversal of the “growth at all costs” outlook – or is that, as I suspect, a false premise?

Q: What can we expect to see from Genesee & Wyoming (GWR)?
Despite the national increase in share repurchases, GWR showed a slowdown in buybacks – another wisp of smoke in the ongoing search for going-private fire? Nothing much came out of what seemed to be a rather perfunctory, if not desultory, AGM. However, there has been interesting investor discussions of 20-30% premiums to the current price (NAV). Further, Bloomberg suggested that the process included some of the biggest PE names (AKA “the usual suspects”) were already into the second round, and that GWR was looking for something at or above the upper end of the afore-mentioned range. Is this for real (as the short line community believes) or a valuation process?

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Alison Babcock