CSX 4Q16 Earnings Call Notes

CSX Corporation’s (CSX) CEO Michael Ward on Q4 2016 Results

Probably an opportunity to move to a one man crew

“Well clearly as you look out technology is evolving David, there is going to be autonomous vehicles out there. There is no question, the only question is when and how much they will be deployed. And if you think about us putting the Positive Train Control system in place, which we will have in place as required by law. One does have to question why there needs to be two people on the crew when you have that kind of safety overlay in there. So over time, I think that will be an issue. I don’t think it’s in the near-term, but longer-term, that’s certainly something we’re going to have to address.”

Frank Lonegro

Expect a healthier environment in 2017

“Overall the industrial economy is more stable and energy headwinds are moderating. However, we continue to face a strong U.S. dollar and low commodity prices which constrains growth in some markets. As we think about the full-year 2017, we anticipate a healthier volume environment. ”

Labor inflation is on the healthcare side not wage side necessarily

“Ravi on your inflation question I think in the prepared remarks, you heard the $35 million inflation on labor and fringe and there are some pretty key industry drivers as part of that, it’s not really on the wage side of things, it’s on health and welfare side so medical inflation obviously there’s always going to be a little bit, little bit higher than we would like. ”

Frederick Eliasson

Pricing environment improving but may not get where we want until 2018

“Sure. So I will just remind again, we really don’t forecast pricing, it obviously has been a tough period, an extended period now from a pricing perspective and lot of excess capacity out there and our challenge to our team is of course to sell through this trough, make sure we sell the improved service product that we have, the unparalled network access that we have and provide innovative solutions to our customers and I think the fact that we, we’ve been able to do as well as we have I think is a good testament to both the fact that, it isn’t value driver of ours and it is also a good testament to the fact that we really do need to make sure to continue to value price to be able to reinvest in the business the way we want to. And so it has been a sequential downtick. We’ll see when it when it turns, I think there’s a lot of good things going on as the economy picks up. I think is good thing if we continue to low unemployment that put pressure on the wages. We know that. We see the deal demand is coming into play here as we get into the second half of 2017. So I think things are lining up for better pricing environment as move through the second half of 2017 but it might not fully be where we want to be until we get to 2018.”

Delta 4Q16 Earnings Call Note

Delta Air Lines’ (DAL) CEO Ed Bastian on Q4 2016 Results

$7 billion of operating cash flow in 2016

“Financially, we produced $6.1 billion of pretax profits, 16.5% operating margin and a 26% pretax return on invested capital. It looks like we will be the only major to have grown its operating margin in 2016. We generated $7 billion in operating cash flow and nearly $4 billion of pretax [loans] [ph] we used to reduce our adjusted net debt to $6.1 billion, achieved an investment grade credit rating and returned over $3 billion to our owners.”

Excited about infrastructure investment possibility

“Hi Duane, this is Ed. There’s a number of things we are excited about. One of the things we are very excited about is the potential investment opportunities of the new administration, talk a lot about improving in airport facilities we have been doing, a considerable amount of investment alongside our public partners in LaGuardia, LA, Seattle, Salt Lake, Atlanta, but the ability to continue to work with the federal government to drive improvements to the infrastructure is clearly a big deal for us”

Glen Hauenstein

Business yields were weak in 2016 but picked up after the election

“While total demand remained strong throughout 2016, weak business yields were prevalent and drove RASM declines. To address this, in the December quarter, we adjusted our revenue management approach and capped our capacity growth below 1%. Following the election in November, we began seeing improvements in business demand and the firming of business yields. These trends continued into December, which was the first month in over two years that yields improved on a year-over-year basis. As a result, our fourth quarter unit revenues were down 2.7%, better than both our initial guidance and the updated outlook we gave at Investor Day.”

We are substantially capacity constrained at LAX today

“We are substantially constrained at LAX today. We have, I believe, 15 gates currently in terminals five and six and when we get to terminals two and three, we have the possibility to come close to doubling the gate pods but it is going to take some time as we redevelop terminals two and three. That’s not overnight. And it will also take a little bit of the pressure off of the turns on the gate today. We turned terminals five and six to highest levels in the system and once we get a better gate pod, we will be able to reduce some of the congestion at the airport. So, we will have more gates but that doesn’t necessarily mean more direct flights as a result. But net net, we absolutely will be increasing our footprint and our capacity in LAX over the next few years.”

Should be opportunity to increase fares

“I think if you look at the travel spend on a lot of corporates, particularly in major lane segments of domestic U.S., they are considered to be the primary business segments, that the fares were down 30%, 40% on historical basis. And I don’t think we have to get a significant, we are not expecting them to go back to the historical levels in our current plan. This is a journey. It’s not a race. And so I do think that if the economy holds out, which we are forecasting today that it will and business continues to travel which we are forecasting it will, that the opportunity to raise fares in that environment with a lower level of capacity offering from the industry is significant and it gets better as we move throughout the year because the fare has got to be so low for business travel by midyear last year. If you take one of the primary business markets in Atlanta to City X, that used to be $750 for a day trip, it got down to $119 for a day trip today. It is sitting at $350 for a day trip. Could it go to $400? Could it go to $450? We see no propensity to decrease travel going from $750 to $100 and I don’t think we will see it our way back.”

Continued appreciation of the dollar would pressure foreign routes

“If I had one issue that I would be a bit of a cautionary issue is if the dollar continues to appreciate, that would put a little bit more pressure on foreign point-of-sale. But core demand as strong and capacity levels seems to be generally in a better spot this year than they were last year looking forward. So I am cautiously optimistic that absent of another run in the dollar, another significant run in the dollar, that this is, as we have said, in the Pacific, that the fourth quarter would be our low point and that we would move forward from there and that summer in the Transatlantic with heavy point of sale U.S. would be a very good summer.”

Paul Jacobson

Cost escalation in 4Q

“That said, fourth quarter saw a bit more cost escalation than we have been seeing so far this year. In addition to the impact of wage increases related to the ratified pilot agreement, there were timing issues in light items such as maintenance, contracted services and rents and landing fees that drove expense pressure in 4Q after having provided benefits in earlier quarters. ”

Low crude crack spreads have helped keep jet fuel prices in check

“Turning to fuel. Our total fuel expense declined by $240 million or about 15% despite higher crude oil prices, as we lapped hedge losses from 2015. While crude has moved higher, crack spreads have remained low, which has helped keep jet fuel prices relatively in check for the airline with pressures result at the refinery which lost $40 million for the quarter as expected. For 2017, we expect our fuel cost pressures will be weighted for the first half of the year. As you remember, during the first quarter of last year crude prices averaged $35 a barrel and hit a low of $26 in late January before they began to increase steadily from there.”

Star Bulk Carriers 3Q16 Earnings Call Notes

Star Bulk Carriers’ (SBLK) CEO Petros Pappas on Q3 2016 Results

Commodity prices appear to have reached bottom

“. After more than two years of strong declines, commodity prices appear to have reached a bottom during the first half of 2016 and have experienced a strong recovery rally during the last couple of months. We believe that the monetary and fiscal stimulus that took place in China during 2015 and first half 2016 has resulted in a healthy recovery of steel consumption as well as electricity requirements. Home prices have continued to increase, while steel mill production and profitably has also improved. It is encouraging that both iron ore and coal internal production in China have continued to record strong declines during the first 10 months of 2016. This has partly been the result of government regulation, such as a 276-workday restriction on coal mining that came into effect during the second quarter of 2016.”

No reason to be that positive on the market until after 2018 or 2019

“The major problem is if we become too positive about the market, which I don’t think there is a basis right now. I think there is a basis to become very positive about the market after 2018, 2019. I think we will see a very strong market after that. But for 2017, I don’t see the reason to be that positive. I believe that this additional deadweight will require demand of about 4% to 5%, which we will probably not see. And the problem is going to be that people might stop scrapping. Not to mention potentially some people ordering.”

Customers don’t view the current market as sustainable

“Hi, Herman. Well, first of all, I think that charters believe that the market is not sustainable. That’s number one. So they would not experience for let’s say one-year because they probably think that at some point later on in time, the rate would fall again. However, as the market is pretty strong right now, and especially in the Atlantic, what charters do is they give us like one-year charters. Because if they don’t, they will have to pay $15,000 and $17,000 and $18,000 a day for the next trip.”

Capital is not as available as it used to be. We have all lost a lot of money

“Well, hi, Ben, thank you for the question. I think that first of all, equity capital is much less than what it used to be. We have lost – all of us have lost a lot of money. So on that side, I don’t see much capability for newbuildings. Also, the Western banks will probably not finance newbuildings. I mean, the banks have talked – I think it’s the last thing in their agenda right now. I think the only risk of ordering comes through China in case Chinese banks in cooperation with the state decide to give 90% finance to finance vessels in their home yards. That’s I think the only risk that we are in right now.”

I don’t know what the Trump affect is going to be

“Now I don’t know what the Donald Trump affect is going to be in the market. You guys are all in the States. You can probably judge better than I can. On the one hand, maybe there’s going to be measures that boost the American economy. On the other hand, if there is issues with the trade act with other countries that could create protectionist – build protectionist walls for trade. So I don’t know the plus or minus what is going to be the final effect there.”

UPS 3Q16 Earnings Call Notes

United Parcel Service (UPS) Q3 2016 Results
David P. Abney

Global growth has continued to be modest

“Turning now to the economy, where global growth has continued to be modest. In the U.S., consumer fundamentals remain healthy and account for most of the economic expansion while the outlook for industrial production remains weak. Overall, global GDP forecasts are slightly down. For the balance of 2016, we continue to see mixed economic signals across some industrial markets. ”

Kathleen M. Gutmann

Total holiday sales are expected to increase by 3.6%

“In the overall U.S. market, the National Retail Federation expects total holiday retail sales to increase 3.6%. They’re also estimating non-store retail sales growth between 7% and 10%.”

Alan Gershenhorn

Our ecommerce value prop is second to none

“as we all know, our customers, and specifically our ecommerce customers, have a number of different channels that they can access in order to market and transport their goods. And there’s Fulfillment by Amazon, there are marketplaces out there, and obviously direct from their website. We really support our customers in all three of those areas. And I think, like David said, our ecommerce value proposition is really second to none, and it’s convincing both the bricks and clicks type of etailers in the ecommerce pure plays to give more and more of their business to UPS. So we’re excited about the overall prospects of ecommerce in the marketplace, and we’re making the necessary adjustments to essentially support all the various channels that our customers use to bring their goods to market.”

Still seeing softness in industrial out there

“Yeah, so as we said, our B2B is up about 2%. It’s best growth we’ve had there in five quarters. As you know, the B2C is very strong at double-digit. Specific to your question, on the returns, returns growth in ecommerce is also very strong. It’s growing in the mid-teens. Again, you got to keep in mind that returns is a small part of our B2B market, but it’s a large part of the growth that we’re seeing today. As concerns the remainder of the B2B market, we’re still seeing the softness in industrial production out there. ”

One in six e-com packages are returned and those are highly profitable packages for us

” when you look at the ecommerce market, it could be one in five or one out of every six packages that are shipped to a consumer get returned. So the growth in that particular market tracks very closely to the growth in ecommerce on that one to five, one to six ratio. Those packages are highly profitable. First of all, many of those packages get dropped off and don’t have to be picked up because the consumer finds it more convenient to drop them off at UPS stores or UPS Access Points or hand them to a UPS driver. So there’s very little cost when it comes to pick-up. And then obviously, the deliveries are going back to businesses, and we could be delivering tens or hundreds of packages back to these businesses. So it’s a highly profitable B2B delivery with very little pick-up cost.”

Myron A. Gray

Answer on automation question

“When it comes to the use of drones as well as vehicles that allow us to have autonomous trucks on the road, we have experimented with drones with a number of vendors. You should’ve seen an announcement where we launched our first try in the Northeast earlier this year. It was very successful, as well as our use in delivering medications in Africa. So we’ll continue to experiment until we get the ability to use it. As it pertains to vehicles, we’re continuing to work with a number of vendors to explore what works best for us. We have what we term as a rolling laboratory. We have over 6,500 vehicles in the U.S. right now that are considered CNG, LNG, and the sort. Of course, all of this will require the approval from the National Highway and Traffic Association.”

Union Pacific 3Q16 Earnings Call Notes

Union Pacific’s (UNP) CEO Lance Fritz Q3 2016 Results

Remain cautious of auto sales sustaining these levels

“Turning to autos, light vehicle sales are forecasted to finish 2016 at $17.4 million, down less than 0.5% from the 2015 record rate of $17.5 million. Although we expect sales incentives, low gasoline prices and consumer preference will continue to drive demand. We remain cautious with respect to auto sales sustaining at these levels. A continued focus on over-the-road conversions will support auto parts growth.”

Some segments showing signs of life

“The macroeconomic environment still has its challenges and unstable global economy, the relatively strong U.S. dollar and continued soft demand for consumer goods. However, certain segments of the economy are showing signs of life. A recent rally in energy prices has crude oil over $50 a barrel and natural gas over $3 per million btu, which are both encouraging for our coal and shale-related businesses.”

Going to continue to push our pricing power

“Scott our philosophy is not changing and as a matter of fact, our top line this quarter reflects that it’s not changing. We are pursuing business in the marketplace that we can price for the value that we represent and that’s re-investable. And if we can’t find that we walk away from it. So nothing has changed about that philosophy.”

Port strike bigger than the Canal in terms of west to east coast traffic shift

“No, I think the Panama Canal story is what we’ve been saying for the last several years and certainly I think the last couple of quarters we’ve been mentioning that the amount of traffics hitting the West Coast versus the East Coast did – there was traffic that moved to the East Coast because of the strike and BCO’s trying to diversify their risk and not be dependent upon the West Coast. We did see that phenomena. We have seen some of that business start to come back, but it hasn’t all come back from before the strike. That has probably been a larger factor than any Canal opening factor. The fact that the BCOs are diversifying their flows and a lot of ways just to not have that risk.”

Eric Butler

Container ship companies face tough times

As you mentioned Cherilyn there is a significant volatility going on in the international container ship business. There have been three major mergers, one bankruptcy, there are a number of other entities that are in dire or questionable financial shape. One of the things that all of the container ship companies are looking at doing is finding ways to have match backs or exports from the U.S. to Asia.”

$3 natural gas is good for coal

“The below $2 natural gas prices has created a headwind for coal in the past. We’re excited or we think that with natural gas being above $3 now and even some of the futures market showing it in the mid-3s that that certainly will improve the competitive condition for coal, but that has clearly had an impact likewise.”

CSX 3Q16 Earnings Call Notes

CSX’s (CSX) CEO Michael Ward on Q3 2016 Results

Revenue declined 8% in line with volume decline

” Revenue declined 8% in the quarter, consistent with an overall volume decline of 8% which included a 21% decline in coal volume.”

Need to have some growth to improve operating efficiency

“But growth does have to be a critical component as we move to the mid-60s operating ratio. We’ve got already tempered economy here for the last two years and clearly growth has to be part of that equation. And we think with the service partners we have Fredrick’s team can grow it once we see any signs of vibrant in the economy, but that is part of the equation.”

Frank Lonegro

Automotive expected to grow, ag neutral

“Automotive is again expected to grow as light vehicle production remained strong and new business continues to ramp up. Agricultural and food products is expected to be neutral, the record grain harvest will drive year-over-year gains. However market dynamics for ethanol remained challenged near-term for CSX due to increased movements in storage in the Gulf region. Export coal is also neutral as we are seeing some near-term increase in meteorological demand, driven by reduced Chinese supply such that volume should be similar to last year’s levels.”

Significant amount of excess capacity impacts pricing power

“Sure so in terms of overall same store sale pricing we’re obviously very transparent. What we’re doing there each and every quarter you’ll have an opportunity to see that in the fourth quarter. There is clearly more difficult sale environment and it’s been there for a period of time as we see a significant amount of excess capacity. Our focus continues to be to price the value that we provide our customer to be able to continue to reinvest. We have an improved service product year-over-year that is very helpful. And what we are trying to do is to sell through this trough so to speak and sale that kind of the long-term access to a network and the capacity that we have.”

Coal inventories have come down, natural gas prices up a bit and that is helpful but we generally need to see those higher

“Sure so clearly the hot summer has been helpful the cooling degree days has been very helpful especially in the South we’ve seen significant reduction in the inventory levels, I think in the South in terms of days burn we’re down to from 150 a year ago to somewhere around 100 now. And even in North we have come down a little bit, I would say though overall that they’re probably still slightly above where they would like for them to be, in certain places they are less, certain places they are more, but they’re probably still a little bit above where they would like it for them to be.

But it is good news that we’re starting to see that and also to your point about natural gas prices they have come up a little bit, that’s also helpful. But generally though we do need to see those natural gas prices closer to 350 or above to make really meaningful impact and we’re excited where we’re heading we’ll have a much better view I think as we get into the fourth quarter and early next year in terms of what coal will do for 2017 not just on the domestic side, but also on the export side.”

We are seeing a continued shift towards more east coast intermodal vs west coast

“Sure this is Fredrick, so what we’re seeing and have been seeing is a continued shift towards more East Coast internationally intermodal coming in versus West Coast. And as a result the ports are clearly making investment not just Savannah, but other ports as well. And we are as well to make sure we can serve that. And that is attractive business that we want to get more of. And as we see additional investments come online we’ll have an opportunity.”

Our pricing power should get better eventually

“Sure, I mean it is clear that we’ve had a tough market for an extended period of time now in terms of excess capacity. And it does impact not just intermodal business, but certain markets within our merchandise business as well. Generally shorter haul also generally lower contributory traffic that are more susceptible to being switched over to truck. As the market turns and it will turn we see new orders of truck of Class A trucks have come down significantly 30% 40% year-over-year , year-to-date. We know ELDs will be coming in by sometime in the second half of next year. And if the economy continues to expand and unemployment stays low that should lead to a much better environment as we get into late ‘17 and that will be helpful.”

Shift to east cost intermodal not necessarily due to Panama Canal widening

“Sure, so this is Fredrik again. We have seen the shift for an extended period of time, that we see more of our international cargo coming in on the East Coast porch. We have not seen a significant change in the amount of volume coming in since the Panama Canal got widened. What we are seeing that there are some bigger vessels coming in, but generally it is not necessarily adding capacity.””

FedEx 1Q17 Earnings Call Notes

FedEx’s (FDX) CEO Frederick Smith on Q1 2017 Results

TNT’s express freight capabilities were a key attraction

“The attraction of TNT was many-fold but I have to tell you that one of the key attractions was their unduplicated express rate network in Europe. And of course Europe is a high density of population and their ability to move these pallets very fast throughout Western Europe was a tremendous advantage.”

Thoughts on effects of autonomous vehicles

” In terms of UAVs in particular, we have five separate, I think it would be not fair to call all of them projects but work streams or projects in both aviation and automated vehicles. The difference with us and a lot of other people we’ll just prefer to keep working those issues and tell you about them when they make a meaningful difference in the company. I will say this much. I think our philosophy and we know a lot about these technologies. After all, our auto pilots in our 777 airplanes are among the most sophisticated robots in the world. They can take off, land the plane and taxi to the gate and turn themselves off if that’s what we chose to do so. But it’s very difficult in the foreseeable future to substitute for the well trained pilot or driver or person. And we look at the use of automation more as an opportunity to improve the productivity of those types of experts within our system to make their job more comfortable and easy and above all to increase safety. So those five work streams are underway. You’ll hear a lot about them I’m confident in the next few years. But important in our philosophy maybe slightly different than a lot of other people that think that right over the horizon, everything is going to be an automated vehicle or some sort of UAV. We think that is unlikely and that this technology like most technologies particularly aviation technology will evolve incrementally over time with a great emphasis on safety first.”

T. Michael Glenn

Moderate growth in the global economy

On the economic front, we see moderate growth in the global economy. Our U.S. GDP growth forecast is 1.6% for calendar ’16, 20 basis points lower than our last forecast in the last quarter and 2.3% for calendar ’17 led by gains in consumer spending. Our global GDP growth forecast is 2.2% for calendar ’16, 10 basis points below last quarter and 2.6% for calendar ’17. We expect industrial production to decline 0.7% in calendar ’16, 10 basis points lower than last quarter and increase 2.2% next year.

Raising rates by 3.9%

” we will be raising rates effective January 2, 2017. FedEx Express rates will increase by an average of 3.9%. Rates for FedEx Ground and FedEx Freight will increase by an average of 4.9%. We will also change the dimensional weight divisor for FedEx Express and FedEx Ground from 166 to 139.”

Shift in peak delivery to Mondays

“Beyond just the dramatic rise in volume, there are several other shifting industry dynamics. Holiday promotions and buying patterns have increasingly shifted which has resulted in heavy demand for package delivery on Mondays during the peak. The intensity for demand on Monday has accelerated in recent years, as more and more retail locations have started serving as fulfillment centers for e-commerce orders. We expect each of the four Mondays during the upcoming peak period to be among the busiest in our company’s history.”

Increased demand for larger and heavier packages

“We have also experienced increased demand for transportation of larger and heavier packages. As e-commerce grows, there is demand for online ordering and delivery of everything from large screen TVs to mattresses and trampolines. We’ve engineered our network’s sortation and delivery capacity for these larger packages, including entire temporary facilities dedicated to the sortation of oversized packages, which will be critically important this upcoming peak season.”

Adding 50,000 seasonal workers

“Across the FedEx portfolio, we expect to once again add more than 50,000 seasonal positions to help the holidays arrive. Based upon growth expectations and network expansion, many of these seasonal team members will have an opportunity for full-time work at FedEx after the holidays.”

Alan Graf

Earning projected at $12.35 in FY 17

“According to our corporate outlook based on the moderate economic forecast that Mike discussed and the momentum we have, we project adjusted earnings to be $11.85 to $12.35 per diluted share for FY ’17, which excludes TNT integration, outlook restructuring costs, TNT intangible asset amortization and year-end mark-to-market pension accounting adjustments.”

David J. Bronczek

TNT’s crown jewel was the best ground network in Europe

Yes, this is Dave again. The jewel in the crown always at TNT was the very best ground road network in all of Europe. It’s great service. They have great people, great cost structure. So with that now in our portfolio around the world, customers have always asked us for a solution for e-commerce to move across the world and mainly into Europe. Now we’ll have that opportunity to do that very successfully. Thank you.

UPS 2Q16 Earnings Call Notes

United Parcel Service’s (UPS) CEO David Abney on Q2 2016 Results

B2C strong B2B not as much

“Turning to the economy, the consumer market in the U.S. remains healthy and e-commerce forecasts have been elevated for 2016. And we’re seeing that growth. On the other hand, our B2B volume is affected by the continuing weakness in industrial production. In fact, global GDP and industrial production growth forecast have been downgraded slightly. Delayed inventory drawdowns and soft export demand likely will remain headwinds in the latter part of 2016. ”

Mindful of political commentary on trade

“Additionally, we’re mindful of the current political commentary on trade. Increased trade not only bolsters business but also produces jobs here in the U.S. and abroad. Historically, following ratification of trade deals we have seen about a 20% increase in U.S. exports to the countries involved. UPS is a steadfast proponent of trade and supports agreements that minimize friction in the global supply chain. Trade legislation to accelerate economic expansion like the Trans-Pacific Partnership is vital to the health of the U.S. economy. We encourage our political leaders to support and pass pending trade legislation.”

Consumers want alternative delivery locations

“We recently released the fifth annual U.S. Pulse of the Online Shopper study that highlights some of these changing trends. This year’s survey revealed that most shoppers prefer home delivery while also expressing an interest in an alternative delivery location. To provide more delivery options, UPS is expanding our Access Point locker program in several major U.S. markets. ”

Brexit adds some complexity but our job is to simplify the complex

” Brexit we don’t see changing that for that market, quite frankly. Our job is to continue that priority, number one, to take care of that economy and the consumers, our employees and the shareholders and link it into that European network. So that is priority one. The issue obviously becomes what the free-trade agreement is set up to be. Don’t forget a couple of things from my perspective, one is there are many, there’s a number of free-trade agreements in that union, as well. You’ve got the Norway model, you have got the Swiss model and you’ve got the EU model. So how it unfolds we will see but there are various models that could unfold. We’ve analyzed scenarios as far left as the WTO setup all the way back to something close to what they have today. In the end I think our priority is to advise and advocate and support consumers at the free-trade agreements are finalized in the coming years and then continue to whatever happened support that market in the network. I think we could easily say there will be somewhat more complexity but I think our job is to simplify the complex in a network for consumers and continue the great service. And that’s what we plan to do as that unfolds.”

Alan Gershenhorn

Seeing a slight increase in B2B

On the commercial B2B side we did see a slight increase. The good news is we’ve seen a slight increase the last few quarters there. It’s mainly being driven actually by the retail sector and returns but we’re seeing some growth in some other areas. Wholesale, healthcare and professional services are some of the other areas and then also consumer and home goods. As you know industrial production, as David indicated, was pretty soft and B2B is really being driven now by retail and some of those other sectors that I have spoken about.

Diana Shipping 2Q16 Earnings Call Notes

Simeon Palios

We are in talks with banks about repayment schedules

“We are currently proactively and we are active before a problem arise, if it does, to come with an agreement with the banks as regards possible using on the repayment schedule. If we do not manage to come to an agreement, we have to continue business as usual. And at this stage of the cycle we are considering cheap assets, cheaply purchased vessels at the bottom of the cycle, as good as cash or even better.”

We are considering a 40-80m investment within the next 4 months,/strong>

“So there is some truth in what you have said because we are ready to buy vessels, certainly not spend the entire cash position that you see, which is substantial, but an investment within the next four months, equal to $40 million-$80 million is certainly something that we are considering seriously.”

Anastasios Margaronis

Slight improvement in dry bulk carriers’ earnings prospects

“The second quarter has seen a slight improvement in the earnings of bulk carriers across the board. The Baltic exchange industries reflect quite accurately this development. At the beginning of the second quarter the Baltic Dry Index stood at 450, and on 30 June it was at 660. The Baltic Cape Index started at 345 and closed at 996, while the Baltic Panamax Index similarly recovered from 535 to 662.”

22m dwt sold for scrap in industry

“Demolition now — the first half of this year saw record numbers of ships heading for the scrapyard. According to Clarksons, 36 ships of 11.1 million deadweight of Capes were scrapped during this period, also 88 Panamaxes or 6.3 million deadweight headed for the scrapyard during the same period. A total of 22.2 million deadweight of bulk carriers were sold for scrap during the first six months of this year, which was 35% more than the first six months of 2015.”

Iron ore trade expected to be up 2% this year

“According to Clarksons seaborne iron ore trade is expected to increase to 1.391 million tons, which would be 2% higher than in 2015. An increase in construction activity in China has supported a firm recovery in the country’s steel production in recent months. According to Clarksons it has helped support higher iron ore imports by China. This increase is expected to outweigh declines of imports into other countries.”

Analysts predict an improvement in bulk carrier earnings, but not sustainable recovery

“on balance, analysts predict an improvement in bulk carrier earnings during the rest of this year but do not foresee a sustainable recovery until the circle of tonnage created by the uncontrolled speculative ordering of bulkers during the last three years or so are absorbed through scrapping and higher demand.”

Ioannis Zafirakis

Raising equity is out of the question. We still have plenty of time ahead before we have real problems

Certainly raising equity is out of the question, especially proactively. That’s why I keep talking about the proactive part of the story. We still have plenty of cash aside and we still, by adding our models and you are adding yours, you can see that we have a nice time ahead of us before we have a real problem, where we can discuss with the banks again.

There are unencumbered assets that could be sold before raising assets even at a higher price than paid

” before the raising of equity you can sell the unencumbered assets…Even at a higher price than what you have paid today.”

Union Pacific 2Q16 Earnings Call Notes

Union Pacific (UNP) Lance Fritz Q2 2016 Results

Volumes declined in five of six groups

“Total volume decreased 11% in the quarter compared to 2015. Carload volume declined in five of our six commodity groups, with coal, Intermodal and industrial products all down double-digits. Agricultural products was the only group to show positive year-over-year growth, with volumes up 2% this quarter, reflecting stronger grain shipments versus 2015.”

Soft global economy will continue to pressure volumes

“A soft global economy, the negative impact of the strong U.S. dollar on exports, and relatively weak demand for consumer goods will continue to pressure volumes through the second half of the year.”

Eric Butler

Reduced drilling activity continues to negatively impact minerals

“In industrial products, reduced drilling activity will continue to negatively impact our minerals and metals rock volumes for the remainder of the year. The improving construction and housing market should drive growth in our lumber and rock volumes.”

Cameron Scott

Robert Knight

Expect 2% wage inflation

“Labor inflation was about 1.5% in the second quarter, driven primarily by health and welfare, which is partially offset by some favorable pension expense. We expect full year labor inflation to be around 2%.”

We have a lot of strong competitors

“Yeah, Chris I think you said it right, we compete vigorously every day for business we have strong real competitor, strong truck competitors. We have strong water barge shipping competitors and you’re exactly right we compete vigorously. We do think we have a strong value proposition and we think that with that strong value proposition we can compete effectively on that value proposition and price for the value that we’re providing to the marketplace. As I said earlier you’re seeing capacity tighten and many of those modes and we think that’s positive for the competitive environment, but, yes, we compete vigorously every day.”

Eric Butler

There will probably be more opportunity to move grain in the second half than the first

“if you look at the crop there was something like 6 million more acres of corn planted this year and it’s still dependent upon kind of the weather and the harvest, but right now it looks like it’s going to be pretty decent yields from the current crop. And so if you look at the pretty decent yields from the current crop if you look at the high storage levels on a historical basis, if you look at some of the challenges — in particular South American crops that have had, it suggests that there’s going to be opportunity to move grain in the second half of the year at a higher run rate than what we saw in the first half.”

Half of auto business is to or from Mexico

“Yeah. So, about half of our franchises to or from Mexico that’s all unfinished vehicles and parts. We — the Mexico volume is growing as you know. Historically, it was like 2 million vehicles, I think they are probably up to about 3.7 million vehicles produced in Mexico. The forecasts is they are going to get close to about 5 million vehicles produced in Mexico.”