(Reuters circulated the following on June 17.)
NEW YORK — Railroad operators’ shares fell in early trading on Tuesday amid concerns flooding in the U.S. Midwest will hurt the companies’ second-quarter results.
The worst flooding in the region in 15 years has damaged unknown miles of railroad track and bridges. The extent of the damage to some rail infrastructure will not be known until flood waters recede.
Rail traffic has slowed across Iowa and at interchange points between Chicago and Memphis, Morgan Stanley analyst William Green said in a research note.
“An unprecedented run in fuel prices and a slowing economy were already limiting rails’ second-quarter earnings growth, but historic flooding in the Midwest should only add to the near-term troubles,” Green wrote.
“While most effects will be temporary, we worry that damage to the corn crop and track signaling may have longer-term implications for the second half.”
Damage to Midwest corn and soybean crops could reduce export shipments, he added.
Green said Union Pacific Corp., the No. 1 U.S. railroad, was hit hardest, followed by Burlington Northern Santa Fe (BNI.N: Quote, Profile, Research) and Canadian National.
Union Pacific enacted force majeure on June 13 because of flooding, allowing it to extend deadlines for cargo delivery.
BNSF, which moves coal through the region, can reroute coal trains but at slower speeds and lower efficiency, reducing revenue by about $12 million a week, according to a Merrill Lynch analysis.
Union Pacific shares fell 2.5 percent to $74.19, BNSF was down 1.1 percent at $104.04, while CSX, Norfolk Southern, and Kansas City Southern each fell about 1 percent.
The railroads were not immediately available for comment.