For new service, ride-hailers take a walk
Express Pool riders picked up, dropped off at common location
DETROIT— The latest variation of an Uber ride will require a short walk.
In eight U.S. cities, the ride-hailing company is rolling out a service called “Express Pool,” which links riders in the same area who want to travel to similar destinations. Once linked, riders would need to walk a couple of blocks to be picked up at a common location. They also would be dropped off at a site that would be a short walk from their final destinations.
Depending on time of day and metro area, Express Pool could cost up to 75 per cent less than a regular Uber ride and up to half the cost of Uber’s current shared- ride service called Pool, said Ethan Stock, the company’s product director for shared rides. Pool, which will remain in use, doesn’t require any walking. Instead it takes an often circuitous route to pick up riders at their location and drops them at their destination. But that can take longer than Express, which travels a more direct route.
MONTREAL— Canadian National Railway Co., the longtime paragon of efficiency for North American railroads, is losing some of its lustre as it struggles to catch up with a surprise surge in demand.
A jump in volumes is causing persistent network congestion, prompting a public rebuke last week from customer Halliburton Co., which said service delays would hurt its earnings.
The problems have dented investor enthusiasm for Canadian National, dragging shares to this year’s biggest decline among the continent’s six biggest publicly traded railroads.
“They’ve always been the gold standard for railroads, but these last few months have been pretty rough,” said Mario Mainelli, a portfolio manager at Caldwell Investment Management in Toronto, which oversees about $1 billion in assets. “If the issues persist, maybe we have a deeper problem.”
Vowing to fix the service problems, Canadian National is boosting its 2018 capital spending budget to a record $3.2 billion and hiring about 400 conductors in the first quarter alone. In December, the Montrealbased company announced plans to buy 200 locomotives, reversing a trend in which railroads parked equipment because of shrinking demand.
The company’s investment plan this year will address pinch points and add capacity, and is “ready to go as soon as the weather allows us to do so,” spokesperson Patrick Waldron said, noting the “very severe, extended” winter experienced by the railroad.
Canada’s biggest rail carrier has dropped 8 per cent since the start of the year, the worst performance among the six biggest publicly traded North American railroads. Twentyone of the 36 analysts who cover the company have either a hold or sell recommendation on the stock, with 11 who see it as a buy. That’s the worst ratio in the peer group.
“There’s definitely no love in the market for CN currently,” Jayson Moss, an analyst at Franklin Bissett Investment Management in Calgary, which has about $20 billion in stocks and bonds and owns Canadian National shares. “Winter came earlier this year, volumes rose, and that put a lot of pressure on their network. CN historically has been the bestrun railroad, but they were caught off-guard with the surge in volumes.”
Halliburton blamed Canadian National last week for halting new shipments of sand needed to produce oil and gas from shale formations through hydraulic fracturing. The delays across a wide section in Minnesota and Wisconsin are expected to last a week. The railroad cited higher-than-expected demand for fracking sand, as well as “brutal” weather and congestion on the tracks.
The first quarter “will be challenging,” chief financial officer Ghislain Houle said at an investor conference last week.
To be sure, Canadian National’s resilience and efficiency should enable it to bounce back before too long, said Keith Schoonmaker, a Morningstar analyst in Chicago.
“Yes, we will see a few quarters of challenges, but CN still has a very productive network,” he said. “Too much demand is a much better problem to have than if your volume goes away — which is what we see happening with the coal business at the U.S. rails.’’
But in the short term, service yardsticks underscore the hurdles for the Montreal-based railway.
Operating ratio worsened almost 4 percentage points to 60.4 per cent in the fourth quarter. For all of 2017, both Canadian railroads reported 57.4 per cent — the first time in more than 20 years that Canadian National hasn’t topped its Calgary-based rival.
“There’s definitely no love in the market for CN currently.” JAYSON MOSS ANALYST AT FRANKLIN BISSETT INVESTMENT MANAGEMENT