(The Associated Press circulated the following on January 16, 2009.)
NEW YORK — Railroads might be on shaky ground as they prepare to release earnings for the fourth-quarter – a period in which demand fell off dramatically as the economy slowed further.
In past quarters, railroads have proven they can offset lower volumes by fetching higher prices for shipping goods. But volume was hit particularly hard in the last three months of 2008, led by auto and construction related shipments that fell by double digits.
In the fourth quarter of 2008, U.S. carloads were down 8.2 percent from the same period in 2007. In December, shipments were down 14.2 percent.
“It’s not surprising that U.S. rail traffic in December and the fourth quarter was down so much – we all know that the economy is in a world of hurt right now,” said John T. Gray, senior vice president of the Association of American Railroads.
The railroads’ economic hardship was highlighted Monday when CSX Corp. said fourth-quarter earnings would fall below Wall Street’s expectations. CSX expects to earn 90 cents per share, excluding one-time gains and losses. Analysts polled by Thomson Reuters, on average, predict a profit of 91 cents per share.
Still, the railroads’ estimate is 6 percent higher than the 2007 fourth quarter. CSX anticipates fourth-quarter revenue growth of about 4 percent from last year, because of higher yields and lower fuel prices. CSX is scheduled to release fourth-quarter results on Jan. 20.
Despite slumping volumes and a deteriorating economy, many analysts believe that railroads will be able to keep earnings up through higher transportation costs and fuel surcharges.