Did Genesee & Wyoming Beat Its Own Revenue Guidance in 2Q17?
Genesee & Wyoming’s 2Q17 revenues
Genesee & Wyoming (GWR) operates in three territories—North America, the United Kingdom, and Europe-Australia. In the second quarter of 2017, Genesee & Wyoming’s 2Q17 revenues were $540.4 million, a 7.8% rise from $501.4 million in 2Q16. The company just managed to beat its own guidance of $540.0 million as well as analysts’ equal estimate.
In 2Q17, GWR’s North American operations contributed ~60.0% of its total operating revenues. The United Kingdom and European-Australian operations accounted for 27.0% and 13.0%, respectively.
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GWR’s carloads in 2Q17
In 2Q17, Genesee & Wyoming recorded 810,000 carloads, a 14.6% increase from 707,000 in 2Q16. Carloads from the newly acquired railroads were ~104,000, or 12.8% of the reported carloads. What was concerning was the fact that the same railroad carloads (excluding the impact of acquisitions) declined marginally in 2Q17.
GWR’s management expects 3Q17 revenues of $575.0 million–$590.0 million. It anticipates $2.0 billion–$2.2 billion in revenues for 2017.
GWR’s Class I peers’ 2Q17 revenues
In 2017, the Trump administration’s policy toward clean energy brought smiles on the faces of US railroads. Why? It led to a revival in coal and rekindled the hopes of coal producers. In addition to other global factors, coal prices rose with an improved 2017 production outlook.
The increased prospects of coal hauling pushed the railroads’ top-line growth. Note that coal still remains the single largest commodity hauled by US railroads. Let’s take a look at the peer group revenue growth in 2Q17:
- Canadian Pacific Railway (CP): rose 13.0%
- Kansas City Southern (KSU): rose 15.0%
- Union Pacific (UNP): rose 10.0%
- CSX (CSX): rose 8.0%
- Norfolk Southern (NSC): rose 7.0%
If you want exposure to transportation companies, you can consider the SPDR S&P Transportation ETF (XTN). XTN holds 12.8% in GWR and its peer group.
Next, we’ll examine the 2Q17 financial results of GWR’s North American operations.