EFTA01387108.pdf

22 February 2018 Trucking U.S. Transportation Figure 1I: U.S. GDP growth has picked up In recent Figure 12: ....Amidst an acceleration in U.S. Industrial quarters... Production 6% 1 5 e 108 496 1 4 I AsIs ,11 ▪ e. t f. .2 107 g 106 .? 105 i g! 2% -i a4 0. (2%) -1 . rill Itifirli 1 II. I. a. 7 104 5.* 103 ig 102 S 101 N N N N N N N N N N N in in in to u> u> N N n E./ea ei a 'era ,- ena a si Es 0 Q ••• O ul 03 iittkO tt;tattgt r )—) <U, .1.13 GOP Growth Rate by Quarter Industrial Production Index ....4•YoY Change Son* o_. On, slew now San Clan:ft as, aces. Rail volumes tell a moderately different story as weakness in certain commodities such as agricultural products, coal, and auto's are weighing on overall carload growth. However, demand for intermodal, which is more truck competitive, has been growing steadily and is expected to remain strong in 2018 amidst tight truck capacity. Figure 13: Carload traffic ex-intermodal has been Figure 14: While Interrnodal traffic (more truck. somewhat constrained due to weakness in ag, coal, and competitive) has been growing solidly auto's 15% 15% 10% 1111111 1" to ro .c U 5% II thimildi (10%) W WWWWW N N N N N N co W WNNNNNN CO C eta rut, 3 a 0. > C ill N 0 to .3 4. 0. > w o m (1,3 N > c w 0 CO N z 2 2 V1 2 z 2 2 San* Onen••••0. MN ! Sans Dan*. 8•-• We are also playing a bit of catch-up following a busy 40 reporting season by putting our final touches on select models. See details below and updated models within this report. • GWR Est./PT revisions: We are lowering our estimates for GWR post 40 results to $3.75 (from $4.20) in 2018 and $4.60 (from $4.84) in 2019. Our price target moves to $84, reflecting an unchanged 18.3x our 2019E EPS estimate. Although mgmt. gave a favorable outlook for all three markets (North America, UK/Europe, and Australia). we remain on the sidelines due to uncertainties largely around operational execution and our preference remains for CSX and CP within our rail coverage. Risks to the upside include accretive acquisitions, better than expected Page 8 Deutsche Bank Securities Inc. CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0089211 CONFIDENTIAL SDNY_GM_00235395 EFTA01387108