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According to published schedule data AMR’s system-wide capacity (measured by seats, not ASMs) over the next three months (May-July) is down 1.6% y/y, an incremental 2bp higher than the schedule data from last week due to modest domestic capacity increases, mostly originating in the west coast. There were a few modest adjustments in the network, but again, nothing terribly needle-moving – so once again, the news is that there’s no news.
As expected, R has restated its income statement, removing pension expense out of each segment and combining Dedicated and Supply Chain Contribution margins. Relative to our higher-end estimates, both of the remaining business segments, FMS and Supply Chain Solutions, modestly missed our pre-tax expectations, while R beat with lower than expected combined Pension and Central Support costs and much better than expected gains on sales.
KSU beat expectations on strong margin improvement but slower than expected yield growth. While intermodal and auto vols remain strong, weekly reported vols have slowed the past several weeks (-1.4% the past 6 weeks) into weakening coal vols although mgmt stated on its call that it expects coal vols to rebound somewhat in 2Q. We retain our Peer Perform rating on KSU given its strong growth story but high-end valuation.
CNI beat 1Q EPS Consensus by more than 15% (excluding a large asset sale gain) on strong volume growth and a record 1Q operating ratio. We believe CNI should beat its upwardly revised target of 10% EPS growth this year following 32% earnings growth in 1Q. We are raising our C12 EPS estimate by 4% to C$5.45 vs. CNI’s guidance of C$5.32 and prior Cons. of C$5.33. CNI’s high-end housing exposure and low-end U.S. thermal coal exposure should support continued solid volume growth. However, we believe pricing and productivity matter more than vols for the rails, and we continue to prefer the U.S. rail stocks which are trading at much lower valuations with better pricing and productivity potential in our opinion despite weak coal vols currently.
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