Excluding Faiveley restructuring costs, WAB reported adjusted 1Q EPS of $0.84 vs. Cons. of $0.82 and our estimate of $0.80. Sales missed our model by 10%, but op. margins were 130bp better than our expectation. A low tax rate was a $0.04 benefit to our model. So a beat, but lower quality. WAB reiterated full-year 2017 EPS guidance $3.95-$4.15 vs. prior Cons. of $4.00 and our low-end estimate of $3.80. WAB also reiterated its full-year sales guidance and Faiveley synergy targets. Conference call at 10:00am ET; wabtec.com.
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CNI reported 1Q EPS of C$1.15, in line with Cons. which has been rising the past several weeks. Total Rev, EBIT and EPS grew 8%, 7% and 15% y/y. Relative to our expectations, yields were 70bp worse and margins were 40bp worse, offset by a $0.01 benefit from a lower tax rate. CNI raised full-year C17 guidance to a range of C$4.90-$5.10 vs. prior Cons. of $5.04 and our prior estimate of $5.15.
On Friday, WBC reported adjusted 1Q EPS of $1.47 vs. Cons. of $1.43. WBC reported 11% revenue growth (ex-currency) in 1Q, its 2nd best growth rate in the past 3 years. Despite strong 1Q results, WBC reiterated its full-year guidance given political uncertainty in Europe and expectations for a big drop-off in China production levels in 2Q. With implied guidance for revenue growth to slow ahead, the stock fell 3%.
On Friday, HTLD reported 1Q EPS of $0.17 vs. Cons. of $0.15 and our low-end estimate of $0.13. Total Rev, EBIT and EPS each declined by 20%, 4%, and 2% y/y. HTLD badly missed our revenue expectation yet again by about 400bp, but its margins came in nearly 400bp better than we expected. The stock rallied 4% in a very strong tape for the TLs.
On Friday, KSU reported 1Q EPS of $1.17 vs. Cons. of $1.16 and our estimate of $1.15. The quality of the quarter was good with yields 380bp better than our model and margins 70bp better than our model, offset by headwinds from a higher tax rate and lower fuel excise tax credits. But operating leverage was underwhelming with incremental margins of 24%. So despite 6% volume growth, KSU’s OR worsened 80bp y/y on higher fuel costs and EPS (ex-tax credits) increased only 7% y/y. The stock fell 3%.
Our WR Transport Index rebounded 3.4% last week, materially outperforming the S&P 500 which was up 0.8%. Prior to last week, we had 4 large misses and pre-reports in the group. So the stocks were falling and expectations were very low. But last week, we had 6 reports and all 6 companies beat. Earnings are still weak for the group overall – EBIT down 25% y/y on average so far vs. -18% on average in 4Q – but the reports came in above low expectations last week and the stocks rallied. Check out Slide 6 for a list of reports so far.
We spoke with a chemicals shipper about current demand trends and rail transportation issues. Overall demand is good right now and our contact expects his rail volumes to recover this year back to 2015 levels after a down 2016. Export demand to Asia is very strong, while domestic demand is more modest. This shipper plans to add a new chemicals plant in Texas by 2019 or 2020 that will add about 4K annual rail carloads at full capacity, and UNP will be the main rail provider. Roughly half of total production is expected to be exported and our contact will use a mix of ports. Our contact plans to ship a large portion in bulk hoppers cars and then move the plastics into shipping containers for exports out of Los Angeles or Long Beach. This shipper is also considering using some ports on the East Coast, but doesn’t have any plans to ship out of any Mexican ports right now. Moving to rail service, line-haul service remains excellent, but our contact is experiencing some service issues with local deliveries. Lastly, our contact has not seen any changes in service levels with CSX since Hunter Harrison has taken over as CEO.
After the close, CVTI reported 1Q EPS of $0.03, above Cons. of $0.02 and our $0.01 estimate, but still down materially from $0.21 a year ago. TL utilization and pricing were both better than our expectations, but CVTI’s margins missed our model slightly, so the beat came mostly from a $0.02 tax shield in the qtr.
After the close, WERN reported 1Q EPS of $0.22 vs. Cons. of $0.20 and our estimate of $0.18. Relative to our expectations, TL margins beat by 100bp, Logistics margins missed by 90bp, and corporate/other costs were $1.5M ($0.01) better. After big misses from SWFT and KNX, this feels like a big beat, although EPS still declined 20% y/y. We’re raising our full-year C17 EPS closer to Cons. but retain our Peer Perform rating.
CSX reported 1Q EPS of $0.51 vs. Cons. of $0.43 and our estimate of $0.45. CSX also provided full-year guidance of ~$2.26 vs. prior Cons. of $2.06 and our prior estimate of $2.16. CSX also reduced its C17 CapEx budged by 5%, announced a new $1B (2%) share buyback and 11% dividend increase. The stock popped ~6%.
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