uploads///GWR Revenues Estimates

Freightliner Acquisition in March 2015 Boosted GWR’s 1Q16 Revenue

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GWR’s 1Q16 revenue

Genesee & Wyoming (GWR) includes the acquisition of rail assets as one of its topmost priorities. GWR’s 1Q16 revenue rose 21.6% to $482.6 million compared to $397.0 million in 1Q15.

Freightliner Group’s revenue was consolidated by GWR at the end of March 2015. Because of this, GWR’s 1Q16 and 1Q15 revenues are not comparable. Let’s instead consider what the company’s management has said. GWR’s management issued a 1Q16 revenue guidance of $475.0 million in February 2016.

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Shipments

The company’s last remaining iron ore customer entered voluntary administration in Australia in 1Q16. Coal and coke railcars in the reported quarter fell by almost 40%. The rapid shift of power generation plants from coal to natural gas and other renewable energy alternatives in the United Kingdom took a huge toll on GWR’s coal shipments in 1Q16.

Weak seasonal intermodal revenue in the company’s UK operations impacted volumes in 1Q16. Strength in the US dollar negatively impacted GWR. It further resulted in low shipments. The company couldn’t even bank on the rally in automotive production and sales. Automotive and auto parts carloads fell by 6%.

Management’s outlook

Genesee & Wyoming has reiterated its $2.0 billion revenue guidance for 2016, almost flat compared to 2015. In 2Q16, the company expects revenue of $490 million. However, the company remains wary of commodity headwinds for the rest of the year.

In GWR’s peer group, Kansas City Southern’s (KSU) 1Q16 revenue fell 7%. Eastern operator CSX (CSX) also reported a fall of 13.5% in 1Q16 revenue on a year-over-year basis. CSX’s competitor Norfolk Southern’s (NSC) revenue fell 5.7% during the same period.

The above-mentioned companies excluding GWR are included in the portfolio holdings of the Industrial Select Sector SPDR ETF (XLI).

In the next part, we’ll discuss GWR’s segmental performance and its management’s outlook for each segment.

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