Genesee & Wyoming Inc. AGWR

Morningstar Rating

Stock Research and Analysis

by Keith Schoonmaker

Genesee & Wyoming's executives have taken a page from the classic board game Monopoly, collecting a stack of 63 short-line railroads in North America and elsewhere. Most of these operations are the exclusive provider of rail service to the firm's Read more

Bulls Say

Genesee & Wyoming holds a solid portfolio of profitable railroading assets, most of which offer the sole rail service to its clients.

Genesee & Wyoming diversifies its holdings by expanding both geographically and into railroad service-related businesses.

The company, and railroads in general, stand to benefit from market trends pushing freight volume from trucking. Cheaper shipping rates offered by rails are emphasized by high diesel fuel prices because trains are several times more fuel-efficient than trucks.

The company's acquisition team is experienced and has a good record, having selected more than two dozen profitable additions. Read more

Bears Say

Former CEO and current chairman Mortimer B. Fuller III controls 40.5% of voting power, and his first cousin controls an additional 9.3%. Together these powerful shareholders limit the rights of other shareholders.

Most of the company's carloads were hauled to connect large railroads to their clients, but because these industrial customers buy rail service from the Class I railroads, the firm can neither negotiate rates directly with clients nor control customer service.

Two forays in developing nations may have had short-lived success: Mexico failed to repair hurricane-damaged track on which Genesee & Wyoming purchased a 30-year concession, and Bolivia announced its intention to nationalize operations in which the company owns a stake.

The firm's largest customer, Georgia-Pacific, which constitutes 5% of freight revenue, is exposed to cyclical paper and forest product markets. In fact, about a third of Genesee & Wyoming's freight revenue is concentrated in these two industries. Read more

Strategy

Genesee & Wyoming operates its assets efficiently, using corporate offices to handle administrative functions for decentralized assets. Each railroad is run by an entrepreneur whose pay is tied to Read more

Management

Our overall opinion of management is positive, but shareholders need to be wary of substantial voting control in the hands of a few individuals. Since he acquired control of the firm 30 years ago, chairman and former CEO Mortimer B. Fuller III has led Read more

Profile

Founded in 1899 to haul salt from a mine in New York, Genesee & Wyoming is the sole public short-line railroad in the U.S. Based in Connecticut, the firm derives two Read more

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