(The following report by Peter Kang appeared at Forbes.com on September 1.)
NEW YORK — Merrill Lynch assessed the impact of Hurricane Katrina on transportation stocks and said rail services firm CSX has the most exposure to the storm-ravaged area.
New Orleans is a sizable interchange point for railroads, said Merrill Lynch, with approximately 3% of total interchange traffic moving through the city. In addition to CSX, other transports doing business in the region include Norfolk Southern, Burlington Northern Santa Fe, Union Pacific and Canadian National.
“CSX, which would appear to be the most impacted due to its network running right along the coast, only moved 23,000 merchandise carloads in all of Louisiana last year and a slim 15,000 carloads in Mississippi, which represented 0.5% of the company’s 7.5 million carloads,” said Merrill Lynch. “However, New Orleans is a fairly sizable interchange market for CSX with Union Pacific, which should add another few points of volume. Thus, CSX could have a few points of revenue negatively impacted in the near term, although much of that traffic should be re-routed to other interchange points.”
Merrill Lynch said CSX has about 100 to 150 miles of track exposed to the brunt of Hurricane Katrina. The research firm forecasts rail revenue to be negatively impacted by less than 2%, “with interim costs posting a slightly larger negative impact in the near term.” It added, “However, over the next few months, additional goods, such as concrete and lumber, should make up for the lost carloads, while the cost impact will remain.”
Merrill Lynch maintained a “buy” rating on Burlington Northern Santa Fe, Norfolk Southern, CSX, Canadian National and Canadian Pacific.