(The Associated Press circulated the following story by Samantha Bomkamp on October 13.)
NEW YORK — U.S. railroads were hurt by hurricanes and a slowing economy in the third quarter, but analysts say that continued pricing strength and lower diesel prices will buoy earnings for the period.
Total carloads on U.S. rails fell 1.2 percent in the third quarter, according to the Association of American Railroads, the industry’s main trade group. Rails took the biggest hits from sinking carloads of coke and vehicles, which both plunged by more than a third from a year ago. Forest products volumes also sank as the housing downturn dragged on. Metal shipments continued to be a bright spot in the third quarter, increasing by 16.2 percent. Coal carloads rose by 4.1 percent.
But Hurricanes Gustav and Ike took their toll in the three-month span, with damage concentrated in the last month of the quarter.
“September was not kind to U.S. freight railroads,” AAR Senior Vice President John T. Gray said. “Hurricane Ike caused significant damage, both to rail infrastructure and to rail customer facilities on the Gulf Coast.”
But underlying economic weakness also had an impact.
“Railroads and their customers are not immune to the upheaval in the general economy due to the credit crunch,” he added.
Morgan Keegan analyst Art Hatfield said in a recent client note that while rail freight volumes continue to decline, he expects the rails’ pricing power and the benefit of falling diesel to help earnings in the third quarter. yield growth and improving operational efficiency should help as well, he said.
But Hatfield suggests that the symptoms of a weakening economy might catch up with the group next year, despite the benefit of lower fuel costs.
Jacksonville, Fla.-based CSX Corp. kicks off the sector’s third-quarter earnings reports on Tuesday.