AP
Sector Snap: Railroads Rise
Friday November 23, 11:59 am ET
Shares of Railroad Operators Rise As Broader Market Gains and Volumes Improve for 2nd Week


NEW YORK (AP) -- Shares of most railroad operators traded higher Friday, as the broader market climbed and a Bear Stearns analyst said carload volumes improved for the second week in a row last week following 34 weeks of declines.

Analyst Edward Wolfe said total volumes improve 0.6 percent last week, compared with a 2.2 percent gain the previous week.

While demand remains relatively weak, Wolfe expects volumes to continue to improve over the next several weeks, most significantly in intermodal carloads. Volumes for intermodal -- which involves moving freight from one method of transportation to another -- have been negative, but improving, in recent weeks.

Grain volumes are also boosting agricultural carloads, the analyst said, as strong demand for wheat exports continues. Additionally, metallurgical coal volumes, although not a significant portion of railroad hauls, are improving on international demand and a weak U.S. dollar. Metallurgical, or so-called met coal, is used to make steel.

However, while volumes and pricing show signs of improvement, Wolfe said that fuel prices should weigh heavily on the sector's fourth-quarter profit.

"While the rails should be generally well protected from fuel over the longer term, they face near-term pressure during periods of rising fuel prices as most of their surcharges tend to lag rising prices by about two months," Wolfe said.

In midday trading, Union Pacific Corp. rose $1.01 to $123.92, while Norfolk Southern Corp. gained 57 cents to $49.24.

Kansas City Southern added 25 cents to $32.75, while Burlington Northern Santa Fe Corp. rose 72 cents to $82.20.

CSX Corp. rose $1.05, or 2.6 percent, to $41.40 and Canadian National Railway Co. rose 26 cents to $46.47.

A stock bucking the trend was Canadian Pacific Railway Ltd., which fell 85 cents to $60.74.