Company Info

Interesting article by Railway Age. Just wondering how long until the bust. The CEO’s and executive offices will do their part in screwing up a good thing.

Investor’s Business Daily remains bullish on rails

Investors Business Daily (IBD) says that at the end of this year’s first half, railroad stocks ranked No. 14 among the 197 industry groups it follows. “The rail boom that began five yeas ago shows no signs of derailing with most railroads racking up double-digit earnings growth,” said IBD in a July 3 report. It quoted Norfolk Southern CEO Wick Moorman as characterizing the railroad story as “a tale of two economies.” While shipments of consumer goods, motor vehicles, and construction materials continue to decline, demand for coal, corn, grain, and soybeans “keeps soaring,” and “railroads haul much of it.”

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Moorman dated the beginning of the rail renaissance to passage of the Staggers Rail Act of 1980, which substantially deregulated the industry. “Even with the economy where it is today, we’re operating much closer to capacity than we did from 1980 to 2000,” said Moorman.

“What’s more, the industry has pricing power, while the ailing trucking industry continues to reel from high fuel costs, labor shortages and highway congestion—all factors that play to railroad’s strengths,” IBD noted. “Analysts expect railroads to enjoy strong pricing power for the foreseeable future.” IBD cautioned, however, that “regulatory changes—especially the possibility of re-regulation—might take some of the steam out of railroads’ growth engine.”

Source: Railway Age Rail Group News 7/8/08