🚂 America's 5 Most Profitable Rail Companies

Good Monday Morning & Happy Labor Day. Today, we spotlight the immense impact of U.S. railways, where a few dominant names have reshaped our nation's transportation tapestry. We also explore the dynamics between OTR Solutions and Convoy in recent credit concerns, observe Coyote Logistics as they manage financial challenges, and understand the rising lawsuit verdicts shaking the trucking industry. Meanwhile, data shows shifting freight market dynamics with shippers showing preference towards asset-based carriers.

Question of the Day: What is the largest cargo railroad company in the U.S. that reported a $25.9 billion operating revenue in 2022 and is a subsidiary of Berkshire Hathaway?

In today's email:

• Three Freight Headlines: OTR Solutions and Convoy address credit concerns, Coyote Logistics announces layoffs amid financial challenges, and the trucking sector faces rising lawsuit verdicts despite improved safety.
• America's 5 Most Profitable Freight Rail Companies
• Around the Freight Web: Home Depot's $157B revenue faces stock issues; Arizona settles for $2.1M border damage and more.
• Freight Meme of the Day

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🐔 WHAT’S COOKIN’ IN FREIGHT

🤝 OTR Solutions and Convoy Clear the Air. In a recent industry stir, OTR Solutions temporarily placed digital freight broker, Convoy, on its "Do Not Buy" list, triggering concerns about their credit. While the industry buzzed, both companies quickly addressed the misunderstanding, with Convoy confirming up-to-date payments. In other news about OTR Solutions, we received data indicating that 78% of their 2022 factoring clients are still in business as of July 2023. For comparison, carriers not affiliated with OTR have a 15% lower operational rate over the same period.

💸 Money Woes Lead to Layoffs for Major Players. Coyote Logistics, having a revenue of $5.2 billion in 2023, confirmed recent layoffs, aiming for "long-term stability." This follows a post-COVID hiring spree and a 2022 market crash. Meanwhile, Knight-Swift, facing financial hiccups, initiated layoffs while executives took pay cuts. Rocket Shipping's CEO, Gabe Pankonin, observes a shifting investor landscape; profitability now trumps sheer growth. The lean, profit-focused startups may be the future industry leaders.

⚖️ Trucking Industry Faces Skyrocketing Verdicts. The U.S. trucking industry is grappling with surging lawsuit verdicts. Despite significant safety enhancements, verdict sizes are escalating, impacting especially the small trucking businesses at the industry's core. From 2010 to 2018, average verdicts against trucking firms rose by an alarming 867%. Yet, between 2000-2020, fatal crash rates dropped from 2.23 to 1.47 per hundred million truck miles. With recent settlements averaging $27.5 million, legal experts look for solutions.

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America's 5 Most Profitable (& Largest) Freight Rail Companies

The world of U.S. cargo railways is dominated by a few powerful names that have left their marks across the vast expanse of the country and have quite literally altered the geographical tapestry of the nation. These powerhouses have shaped the freight transportation landscape and stood as towering testaments to American enterprise. Dominating the 2022 map are five mammoth entities, collectively shouldering a remarkable revenue total.

1. BNSF Railway: Reporting a staggering $25.9 Billion Revenue, this 32,500-route miles giant, under the banner of Berkshire Hathaway, proudly traces back its legacy to 170 years.

• Recent Development: BNSF Railway recently initiated trials for electric and hydrogen-powered locomotives in a bid to achieve their zero-emission goal by 2040.
• Historic Note: One of its most notable mergers was with the Santa Fe Railway in 1995, which created one of the largest freight railroad networks in North America.

2. Union Pacific Railroad: Racing closely behind, it garnered $24.9 Billion from its 32,100 route miles.

• Recent Development: Union Pacific introduced the Water Train, a locomotive system reducing water use by up to 45%, highlighting its commitment to sustainability.
• Historic Note: The completion of the First Transcontinental Railroad in 1869 was spearheaded by Union Pacific, marking a historic achievement that connected the East Coast to the West Coast.

3. CSX Transportation: Drawing $14.9 Billion, CSX spans 20,000 route miles.

• Recent Development: The company completed the acquisition of Pan Am Railways, Inc., expanding its reach into the rapidly growing Northeast region of the country.
• Historic Note: CSX was vital during the Civil War, with its predecessor lines being instrumental in troop and supply movements, greatly influencing war outcomes.

4. Norfolk Southern Railway: This vast network, covering 21,300 route miles, revealed a robust $12.7 Billion revenue in 2022.

• Recent Development: In February 2023, one of Norfolk Southern's trains derailed and caught fire in Ohio, raising environmental concerns and prompting discussions about safety. Since then, the company has been focusing on improving its safety culture and has hired a nuclear power expert to advise on safety.
• Historic Note: Norfolk Southern’s lineage includes the historic Pennsylvania Railroad, once the largest railroad by traffic and revenue in the U.S. during the first half of the 20th century.

5. Canadian National Railway: Meandering through 20,000 route miles, it clocked in a substantial $12.4 Billion revenue.

• Recent Development: CN is committed to sustainability and has set a goal to reduce its greenhouse gas emissions intensity by 30% by 2030, compared to a 2019 baseline
• Historic Note: Canadian National played a crucial role during both World Wars, moving troops and essential supplies, and aiding the war effort significantly.

It's important that Chicago, the U.S.' premier rail gateway, can't be overlooked. Key players like the Harbor Belt Railroad and Belt Railway provide seamless operations.

While rail revenues dipped from $93.3 billion in 2018 to $90.8 billion in 2022, these railways ensure a robust and rhythmic system.

Sources: Sounding Maps

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AROUND THE FREIGHT WEB

🛠️ Home Depot's Challenges. Despite Home Depot's strong fundamentals, higher treasury yields and lower economic growth expectations are creating a challenging macroeconomic environment, impacting the home improvement sector's near-term growth.

🚛 Freight Market Insights. Freight market dynamics change as shippers favor asset-based carriers.

🏜️ Arizona's Border Reparations. Arizona pays $2.1M for damages to federal and tribal lands from a shipping container wall at the Mexico border.

💊 Walgreens' Pivot. Walgreens CEO Roz Brewer steps down amid operational challenges. Company pivots to healthcare, hints of potential sales, with suggestions Amazon could be a prime suitor.

📦 Amazon's Raises Free Shipping Minimum. Amazon raises free shipping minimum to $35 for non-Prime members in select regions, nudging more towards Prime membership.

FREIGHT MEME OF THE DAY

The FreightCaviar Podcast: In our latest episode, Adam DeGroot shares the transformation of his family's legacy from humble farm stands to pioneering DeGroot Logistics, seamlessly integrating age-old produce wisdom with modern tech innovations.

Adam highlights the essential role of cultivating carrier relationships and the frequent challenges they face, like product rejections. Moreover, he introduces FreightSOS, DeGroot Logistics' innovative platform designed to address these common industry setbacks. Listen to this week’s podcast on Spotify & Apple Podcasts.