# Presentation: 160852

## Air Freight & Surface Transportation

*Parcel, Railroads and Non-asset Transportation*
- (312) 706.4600 james.valentine@morganstanley.com

**Air Freight & Surface Transportation**

**Surface Transportation Board’s**
**Staggers Rail Act Hearing**

**October 19, 2005**

**Chad Bruso, CFA**
*Trucking*
- (312) 706.4603 chad.bruso@morganstanley.com

**Mike Manelli, CFA**
*Railroads*
- (312) 706.4604 mike.manelli@morganstanley.com
**Kevin Carr**
*Parcel and Non-asset Transportation*
- (312) 706.4602 kevin.carr@morganstanley.com

## Railroad Industry Financial Forecast

**Air Freight & Surface Transportation**

- Morgan Stanley combined estimates for BNI, CSX, NSC and UNP (free cash flow includes all results, including those that are not railroad related)
- CAGR = compound annual growth rate

## Year-over-Year EPS Growth

**Air Freight & Surface Transportation**

## Railroad RNOA (Return on Net Operating Assets)

*Source: Company Reports and Morgan Stanley Research*

**Railroads**

**Railroad RNOA (Return on Net Operating Assets)**

## Class 1 Railroad Return on Invested Capital 1945A-2007E

**Railroads**

**Class 1 Railroad Return on Invested Capital 1945A-2007E**

## Valuation for Railroads and Comparable Basket

**Railroads**

**Valuation for Railroads and Comparable Basket**

## Air Freight & Surface Transportation

*Parcel, Railroads and Non-asset Transportation*
- (312) 706.4600 james.valentine@morganstanley.com

**Air Freight & Surface Transportation**

**Surface Transportation Board’s**
**Staggers Rail Act Hearing**

**October 19, 2005**

**Chad Bruso, CFA**
*Trucking*
- (312) 706.4603 chad.bruso@morganstanley.com

**Mike Manelli, CFA**
*Railroads*
- (312) 706.4604 mike.manelli@morganstanley.com
**Kevin Carr**
*Parcel and Non-asset Transportation*
- (312) 706.4602 kevin.carr@morganstanley.com

## Morgan Stanley ModelWare

**Trucking**

## Clauses

**Air Freight & Surface Transportation**

**ANALYST STOCK RATINGS**
- Overweight (O or Over). The stock’s total return is expected to exceed the average total return of the analyst’s industry (or industry team’s) coverage universe, on a risk-adjusted basis, over the next 12-18 months.
- Equal-weight (E or Equal). The stock’s total return is expected to be in line with the average total return of the analyst’s industry (or industry team’s) coverage universe, on a risk-adjusted basis, over the next 12-18 months.
- Underweight (U or Under). The stock’s total return is expected to be below the average total return of the analyst’s industry (or industry team’s) coverage universe, on a risk-adjusted basis, over the next 12-18 months.
- More volatile (V). We estimate that this stock has more than a 25% chance of a price move (up or down) of more than 25% in a month, based on a quantitative assessment of historical data, or in the analyst’s view, it is likely to become materially more volatile over the next 1-12 months compared with the past three years.  Stocks with less than one year of trading history are automatically rated as more volatile (unless otherwise noted).  We note that securities that we do not currently consider "more volatile" can still perform in that manner.
**ANALYST INDUSTRY VIEWS**
- Attractive (A). The analyst expects the performance of his or her industry coverage universe to be attractive vs. the relevant broad market benchmark over the next 12–18 months.
- In-Line (I). The analyst expects the performance of his or her industry coverage universe to be in line with the relevant broad market benchmark over the next 12–18 months.
- Cautious (C). The analyst views the performance of his or her industry coverage universe with caution vs. the relevant broad market benchmark over the next 12–18 months.
- The information and opinions in this report were prepared by Morgan Stanley & Co. Incorporated and its affiliates (collectively, "Morgan Stanley").
- As of August 31, 2005, Morgan Stanley beneficially owned 1% or more of a class of common equity securities of the following companies covered in this report: C.H. Robinson Worldwide, Canadian Pacific Railway, Expeditors International.
- Within the last 12 months, Morgan Stanley managed or co-managed a public offering of securities of Kansas City Southern, Union Pacific.
- Within the last 12 months, Morgan Stanley has received compensation for investment banking services from  Burlington Northern SF, CNF Inc., CSX Corporation, FedEx Corp., Kansas City Southern, Union Pacific, UPS.
- In the next 3 months, Morgan Stanley expects to receive or intends to seek compensation for investment banking services from Arkansas Best, Burlington Northern SF, C.H. Robinson Worldwide, Canadian National, Canadian Pacific Railway, CNF Inc., CSX Corporation, FedEx Corp., J.B. Hunt Transport, Kansas City Southern, Norfolk Southern, Swift Transportation, Union Pacific, UPS, Werner Enterprises.
- Within the last 12 months, Morgan Stanley & Co. Incorporated has received compensation for products and services other than investment banking services from Burlington Northern SF, Canadian National, Canadian Pacific Railway, CNF Inc., CSX Corporation, Union Pacific.
- Within the last 12 months, Morgan Stanley has provided or is providing investment banking services to, or has an investment banking client relationship with, the following companies covered in this report: Arkansas Best, Burlington Northern SF, C.H. Robinson Worldwide, Canadian National, Canadian Pacific Railway, CNF Inc., CSX Corporation, FedEx Corp., J.B. Hunt Transport, Kansas City Southern, Norfolk Southern, Swift Transportation, Union Pacific, UPS, Werner Enterprises.
- Within the last 12 months, Morgan Stanley has either provided or is providing non-investment banking, securities-related services to and/or in the past has entered into an agreement to provide services or has a client relationship with the following companies covered in this report: Burlington Northern SF, Canadian National, Canadian Pacific Railway, CNF Inc., CSX Corporation, FedEx Corp., Kansas City Southern, Norfolk Southern, Union Pacific, UPS, Werner Enterprises.
- The research analysts, strategists, or research associates principally responsible for the preparation of this research report have received compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors, firm revenues and overall investment banking revenues.
- Morgan Stanley & Co. Incorporated makes a market in the securities of Arkansas Best, C.H. Robinson Worldwide, Expeditors International, Heartland Express, J.B. Hunt Transport, Swift Transportation, Werner Enterprises.
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