(Reuters circulated the following article by Nick Carey on July 26.)
CHICAGO — U.S. railroad Norfolk Southern Corp. should see continued growth in its coal, agricultural and consumer goods businesses, even if the U.S. economy begins to slow, the company’s top executive said on Wednesday.
“We are far less dependent on the economy than we were a decade ago,” Chief Executive Wick Moorman told Reuters in a phone interview. “Unfortunately there are some people in the market who have not yet embraced that idea.”
Apart from some softening in lumber shipments because of the cooling of the U.S. housing market, Moorman added that the company has not seen demand for its services slackening.
He said he was optimistic this would allow Norfolk Southern to further raise prices on some services.
“The market looks pretty good for this right now,” he said.
The railroad’s CEO spoke to Reuters after the company posted a profit that missed market expectations. Analysts view railroads as an indication of U.S. economic performance and current fears of an economic slowdown helped pushed down Norfolk Southern shares as investors headed for the door. The stock fell nearly 14 percent.
Moorman said demand for coal from utilities should remain high as natural gas prices are not likely to fall in the near term. Demand for grain and ethanol – which has spiked as U.S. refiners have switched to ethanol as a fuel additive – should also remain strong, he said.
“In the event of a slowdown we also expect to see demand for low cost goods at stores like Wal-Mart Stores Inc.
Much of the growth for U.S. railroads over the past three years has come from rising U.S. imports from developing nations such as China as U.S. manufacturers and retailers seek cheaper goods.
In some areas such as the automobile sector, however, he said the company would likely feel the impact of a slowdown, but the extent was unknown.
“It is clear there are some parts of the economy that would affect our business, but we won’t know how much until we experience an economic downturn,” Moorman said.