There is a element of ‘top level’ operating management that considers themselves ‘bean counters’. Real accountants need not apply even though they have no more understanding of real operations than do the ‘bean counters’ I have mentioned.
Accountants count, simple as that.
I suspect a better moniker for the top level folks would be “financial analysts.” They look at the numbers and try to figure out how to make them look better (ie, cutting services, etc).
They only know the numbers. Not what the numbers represent.
With the obligatory MBA degree, a.k.a. MBAhole.
In public ‘Wall Street’ facing companies, their tools seem to be limited to cost cutting and stock buy-backs. Anything else would upset the generic outside ‘analyst’ and cause a stock price disruption.
My take is that an accountants primary job is to produce an accurate report that accounts for where the money came and where it went out. Part of that role is to keep the folks who sign the checks honest. Sophisticated bookkeeping, bt a job that needs to be done.
A financial analyst would be more like an actuary in trying to get a better idea of where the profits and losses are coming from. FWIW, my daughter started college working on a degree in actuarial math and decided to switch to financial math after meeting a few actuarials. One application for financial analysis is trying to get an accurate number for the incremental costs in running a train - which is much easier said than done.
Here is UP’s list of embargoes:
https://www.up.com/customers/embargo/list/index.htm
and for reference here is AAR Circular TD-1, with its list of all the things an embargo can’t be:
https://public.railinc.com/sites/default/files/documents/TD-1.pdf
Investor looking to boot Lance Fritz. Chasing 55 looks to be chasing Lance out the door…
Soroban’s presentation makes some compelling points.
Fred Frailey recognized this in his epic October 20, 2019 blog post “Whatever Happened To UP?”
It is true that underlying the volume growth performance of UP (and BNSF) that has been referenced by Soroban has been the continued precipitous decline in PRB coal loads and Colorado coal loads as more and more coal plants are retired each year. This was high-volume-low-operating-cost business that was a significant double-digit percentage of all UP loads not all that long ago.
But it is up to management to figure out how to make the transition to a low-coal-loads world, which necessitates figuring how to generate volume in other load categories of the railroad.
They kicked Vena out allegedly because he refused some westbound grain business. All because it would’ve required more people and equipment than his (and EHH’s) vision of running a balanced system allows. Only have on hand enough people and equipment to run a set, predetermined amount of volume in each direction. Don’t have any reserve for temporary upswings or new business. Nevermind that it would bring in revenue and more money in their pocket.
The rumors were that BlackRock was the single largest investor, that they had Vena brought in. After they sold some of their holdings and Vanguard became the top dog, they wanted to see more volume and revenue growth. That’s when Vena was “allowed to walk away” by not renewing his contract.
I was hoping once Vena was out they would’ve actually tried to go after more business and increase volumes. They talked, and still talk, about needing growth, but mostly it’s still cuts where ever they can. Any new business seems to be the “low hanging/easy to handle” type.
The kind of performance that Soroban Capital cares about is purely financial. Vena won’t improve the railroad, except maybe by running off more customers.
Jeff
+1
CN’s new CEO recently said (paraphrasing) that they were focusing on volume growth and less so on operating ratio going forward. Time will tell.
With all the dubvious finger pointing by the political knotheads and know-nothings, why not just throw the SEC into the mix and investigate Soroban and Vena?
Just for the heck of it I pulled a couple of key pieces of data from 2022 Financial Reports:
CP
Total Revenues $8.814 Billion, Net Income $3.517 Billion, Net Income % of Revenues 39.90%, Operating Ratio 62.2, Carloads 2.782 Million (Net Income includes some one-time items related to KCS aquisition)
CN
Total Revenues, $17.578 Billion, Net Income $5.118 Billion, Net Income % of Revenues 29.12%, Operating Ratio 60.0, Carloads 5.697 Million
NS
Total Revenues $12.758 Billion, Net Income $3.270 Billion, Net Income % of Revenues 25.63%, Operating Ratio 62.3, Carloads 6.835 Million
CSX
Total Revenues $14.986 Billion, Net Income $4.166 Billion, Net Income % of Revenues 27.80%, Operating Ratio 59.5, Carloads 6.218 Million
UP
Total Revenues $25.301 Billion, Net Income $6.998 Billion, Net Income % of Revenues 27.66%, Operating Ratio 60.1, Carloads 8.169 Million
BNSF
Total Revenues $25.888 Billion, Net Income $5.946 Billion, Net Income % of Revenues 22.97%, Operating Ratio 65.9, Carloads 9.549 Million
Vena decided he didn’t want the CN CEO job after TCI nominated him for it a year or so ago. Was he holding out for this UP position, or does he just want to stay retired and enjoy his golden parachutes?
Some additional reading material:
I for one will be interested to see where decarbonization enabling comes in with maximizing shareholder return.
Perhaps the new regulations for diesel truck engines that became effective on December 20, 2022 just before Christmas will have some impact on modal shift.