The Rail Freight Indicator: US Economy Growing at Steady Rate

The Rail Freight Indicator: US Economy Growing at Steady Rate


The economy looks strong to the major freight railroads that haul the products and raw materials companies rely on, but the lingering trade disputes might derail business if they continue.

Union Pacific (NYSE:UNP) and CSX (NASDAQ:CSX) railroads both sounded optimistic about the economy when they reported hauling 3% more carloads of freight in Q-4.

Norfolk Southern (NYSE:NSC) released its report Thursday afternoon, saying it hauled in 44% more Q-4 profit as volume increased 3% and the railroad increased shipping prices. The Virginia-based company said it had $702-M net income, or $2.57/share in the Quarter that ended 31 December. That is up from adjusted net income of $486-M, or $1.69/share, the previous year. The results from the latest Quarter surpassed the $2.30/ share that analysts surveyed estimated.

“Our customers in discreet markets are in large part doing OK,” Union Pacific CEO Lance Fritz said Thursday. Shipments of steel, construction products, inter-modal containers and a few other categories look particularly strong. “We think there is still opportunity for modest growth in the United States.”

An Edward Jones analyst said the railroads’ results will not add much to fears that the economy is slowing down.

“There has not been any indication at all that the economy is slowing even slightly,” he said.

Union Pacific said its Q-4 net income rose 29% to $1.55-B, or $2.12/share, and topped Wall Street expectations. The Omaha, Nebraska-based railroad benefited from strong demand and efforts effort to streamline its operations that began in October.

Nearly all the major US railroads are implementing some of the operating principles that have led to dramatic improvements in the profitability of rival CSX over the last 2 years.

CSX delivered $843-M in net income, or $1.01/share, last week and promised to continue working to reduce costs and find ways to deliver more freight with fewer locomotives.

The number of carloads railroads carry is considered an indicator of the health of the overall economy because of the variety of goods rails deliver.

Have a terrific weekend


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