The 14 Big Transportation Corps, with Pretax Income or Loss of at least $100 mil in either the 2Q 2011 or in the 2Q 2010, reported Total Pretax Income growth of a modest 9% in the most recent quarter.
So, this has to be bad news, right?
Well, actually just the opposite. The lesson here is the critical importance of Quality of Reported Earnings.
In annual 2010, these 14 Big Transportation Corps generated Total Pretax Income which increased a massive 131% over 2009. So, clearly the earnings base had moved up substantially.
But let me focus on the 12 Big Transportation Corps that had huge Total Fuel Costs.
In annual 2010, these 12 Big Transportation Corps had an increase of $8.4 bil in Total Fuel Costs over 2009, while generating an increase in Total Pretax Income of $13.8 bil over 2009. This illustrates the significance of high fuel costs to these Big Transportation Corps.
But check out just what happened in the 2Q 2011, when Oil Prices went through the roof.
These 12 Big Transportation Corps had an off-the-charts increase of $5.6 bil in Total Fuel costs in just one quarter, the 2Q 2011, and they were still able to generate an increase in Total Pretax Income of $0.6 bil in the 2Q 2011 over the 2Q 2010, which resulted in 9% earnings growth over the 2Q 2010.
Yeah, that’s right…..the increase in Total Fuel Costs, which is embedded in the increase in Total Pretax Income, amounted to 9.4 times the increase in Total Pretax Income in the 2Q 2011 over the 2Q 2010. Just think what the increase in Big Transportation Corp earnings would have been in the 2Q 2010 if Oil Prices hadn’t shot through the roof.
Clearly, the Transportation industry should be working intensely with the Obama Administration to bring down these horrendously high Oil Prices, that are causing havoc on the US economy.
Below here are the Pretax Income (PTI) of these 14 Big Transportation Corps in the 2Q 2011, along with comparison with the prior year’s 2Q of 2010:
.............................................2Q.........2Q............Increase
...........................................2011......2010........(Decrease)
..........................................PTI(L).....PTI(L).....Amount....%
.............................................(in millions of dollars)...........
United Parcel Service.........1,624.....1,300..........324.....25%
Union Pacific......................1,270.....1,146..........124.....11%
Burlington NoSantaFe(1)....1,070.......974............96.....10%
FedEx...................................865........672..........193.....29%
Norfolk Southern..................796........635..........161.....25%
CSX.......................................792........642..........150.....23%
United Continental(2)...........435........271..........164.....61%
Southwest Airlines................275........184............91.....49%
Delta Air Lines......................195........468.........(273)...-58%
CH Robinson.........................180........157............23.....15%
Expeditors Intl.....................155........150..............5.......3%
Kansas City Southern(3)........115.........90.............25.....28%
US Airways............................92........279..........(187)...-67%
AMR...................................(286).......(11).........(275)....NM
Total all 14........................7,578.....6,957..........621.......9%
(1) Burlington Northern Santa Fe is now part of Berkshire Hathaway, but it also files separately with the SEC.
(2) United Continental 2011 excludes credit from accounting change on revenue recognition.
(3) Kansas City Southern PTI in both years exclude debt retirement charges.
And below here are the 12 Big Transportation Corps, which have huge Fuel Costs on their income statements. The below chart compares the increase in Pretax Income (Loss) with the increase in Fuel Costs for each of these 12 Corps for the most recent 2Q 2011 and also for annual 2010.
..............................2Q 2011 vs 2Q 2010........Year 2010 vs 2009
....................................PTI......Higher................PTI.......Higher
...............................Increase....Fuel...............Increase.....Fuel
..............................(Decrease)..Costs............(Decrease)...Costs
..........................................(millions of dollars)......................
United Parcel Service...324.......340.................2,157........607
FedEx(1)......................193........391....................949........934
United Continental.......164.....1,741....................922.....2,483
Norfolk Southern..........161.......154....................745........354
CSX..............................150.......127....................800........363
Union Pacific................124.......296..................1,459........723
Burlington NoSantaFe....96.......334..................1,347........644
Southwest Airlines.........91........594....................581........576
Kansas City Southern.....25..........23....................187..........75
US Airways..................(187).....332....................745........540
Delta Air Lines.............(273).....703.................2,679........210
AMR...........................(275).......547.................1,246........847
Total all 12....................593.....5,582...............13,817.....8,356
Increase in Total Fuel Costs to
…..Increase in Total PTI.............9.4..................................0.6
(1) FedEx annual numbers are for the 12 months ended November.
