Anyone recall what US rail company 3DP is servicing, CSX I hope. Looks like rail companies are a growth industry for us.
You'll need a subscription to access the link, but I've also pasted some key excerpts.
fyi, RealMoney have a subscription discount right now, US$100 for a year, I've used them for a decade and are excellent, especially if you have US stocks, but even if you don't (like me).
https://realmoney.thestreet.com/investing/stocks/chart-of-the-day-how-precise-is-each-railroad-s-psr-program--15023278
These Rail Cos. Are on Track for Precision Systems
We examine how well each major player is trimming fat and improving efficiency on its business amid a potential slowdown.
By KEVIN CURRAN Jul 17, 2019 | 03:06 PM EDTAs external pressures squeeze the railroad industry, understanding which companies are really nailing precision railroading is key for investors.
The idea behind the innovative type of railroading is that more -- more trains and track -- is not always better, but preciseness is.
"While it may sound counterintuitive, reducing fleet size actually enables a railroad to move more volume, by running fewer and heavier trains, faster and on schedule, as assets can be utilized far more productively and can yield significant savings," a white paper on the system authored by Canadian Pacific Railway (CP) explains.
"The prevailing view in the rail industry is that more locomotives, more cars and more crews allow for the movement of more volume. Precision railroading challenges this view. ... Because track and yard capacity is finite, adding more equipment creates congestion and slows down the system."
The success of this system is generally observed in each company's operating ratio, which is represented quite simply by the company's operating expenses as a percentage of revenue.
The system -- pioneered by former Illinois Central, Canadian National Railway (CNI) , Canadian Pacific Railway, and late CSX Corp. (CSX) CEO Hunter Harrison has caught on like wildfire in the industry -- even drawing the attention of legendary Berkshire Hathaway (BRK.A) (BRK.B) CEO Warren Buffett at the company's latest annual shareholder meeting.
"We are not above copying anything that is successful, and there is a good deal that has been learned," Buffett told shareholders, expressing admiration for the business model.
"I doubt anyone is interested in unprecision in railroading," added vice chair Charlie Munger at the meeting.
So, with the importance and popularity of PSR in mind, it is important to observe just how well each company is doing with the lightened loads and sped up schedules.
CSX Corporation
Despite an earnings miss that has led shares down double-digits on Wednesday, the operator that was led for a time by Hunter Harrison is a leader in terms of low operating ratios.
"CSX delivered operating income of $1.3 billion, record operating ratio of 57.4% and earnings per share of $1.08, representing improvements of 2%, 120 basis points and 7% respectively," interim CFO Kevin Boone told analysts on Tuesday evening. "We continue to see significant opportunities to drive efficiencies across every aspect of our business."
The leadership position in cost cutting that still produced an earnings miss and guidance cut is clearly a worry for the market, as the macroeconomic issues are not easily solvable.
But the excellence in execution has given many investors and analysts a silver lining to hang onto.
"CSX is successfully implementing a precision scheduled railroading (PSR) model on its network, which we estimate can deliver an improvement in the operating margin to 42% by 2020," BMO Capital Markets analyst Fadi Chamoun said. "Execution has reinforced the sizable cost improvement opportunity as well as CSX's deep executive bench strength to execute upon this opportunity."
Progression of this system into the coming quarter will be key to keeping investors aboard while macro fears come to the fore and management attempts to control what it can.
