Business & Finance: Revived Rails

(See front cover)

With most U. S. railroads having by last week reported their first half incomes for 1929, statisticians, investors, speculators and railroaders noted and interpreted the following railroad facts:

General Earnings. Estimators figured that the operating net income for all U. S. railroads for the first half of 1929 was at the rate of annual earnings of 6.11% of railroad valuation (by the roads), whereas the same figure for corresponding 1928 period was at the annual rate of 4.78% on valuation.

Notable Earners. Pennsylvania, New Haven, Erie, and Union Pacific showed earnings that reached or approached the records made in their entire corporate lives. Largest net operating incomes for the six months were:

1929 1928

Pennsylvania $65,318,909 $50,760,063

New York Central . . 31,247,488 28,545,314

Southern Pacific. . . . 26,531,328 21,843.134

Atchison, Topeka & Santa Fe . . 25,321,779 13,232,801

Baltimore & Ohio 22,490,840 17,712,360

Stocks. Rail stocks which started up the O'Fallon decision (TIME, May 27). remained strong. Yet not many were selling at 15 times earnings. The following table shows last week's closing on ten rails and the figure those rails would have closed at had they reached the 15 times earnings mark:

15 Times Indicated Last Week's Earnings Closing

Atchison $330 $262

Baltimore & Ohio . 210 135

Chesapeake & Ohio 360 260

Erie 120 83

Illinois Central . . 150 147

New York Central 300 241

Northern Pacific . 150 108

Pennsylvania 135 95

Southern Pacific .... 195 143

Union Pacific 330 271

Passenger Traffic. Railroad passenger traffic has steadily declined since 1921, but every month since November 1928 the rate of decrease has grown smaller. Railroad men feel that passenger traffic has reached its minimum, will improve in the future. As 60 passengers can be hauled in the same coach and at the same cost as 30, an increase in passenger traffic would be very healthy for net incomes.

Porter Plan. Eastern roads are looking forward to the fall announcement of a rail consolidation plan prepared by Claude R. Porter of the Interstate Commerce Commission. Details of this plan have not been made public, but almost any definite program would be preferable to the present uncertainty as to the I. C. C.'s position on almost every rail project.

Improvement in railway net operating income has generally resulted not so much from increases in gross income as from decreases in operating costs. Railroads are being more efficiently run, and by more capable managers. Nor is there any more typical example of the modern rail executive than Southern Pacific's Paul Shoup, man most responsible for Southern Pacific's present scope and vigor.

Indeed, when seven members of California's Bohemian Club* were asked to write on a slip of paper the name of the most potent westerner of the present generation, five of the ballots bore the name of Paul Shoup.