(The Associated Press circulated the following on November 14.)
NEW YORK — Shares of major railroads and trucking companies traded mixed Wednesday, after a Bear Stearns analyst said the traditional rebound after the Federal Reserve interest rate cut is not materializing.
Analyst Edward Wolfe noted the average stock price among 30 transportation stocks has slipped 6.8 percent so far this quarter, compared with a 3.3 percent loss for the S&P 500.
These stocks easily outperformed the S&P 500 in the first two quarters of 2007, Wolfe said, led most notably by the railroads. But weakness in second-quarter earnings reports got worse in the third quarter — traditionally the strongest period for freight companies.
Truckers, the analyst noted, are suffering the most, as weak demand is compounded by poor pricing that’s cutting into profits.
Wolfe also noted rails and trucks have not seen the traditional boost from a reduction in the federal funds rate. The Federal Reserve initially cut the key interest rate on Sept. 18 by a half-point, then again by a quarter-point on Oct. 30.
Traditionally, the group trades outperforms the S&P 500 for 6 months to a year following a rate cut. Since the first cut on Sept. 18, the average trucking stock has lost 18.5 percent, compared with a 2.9 percent loss for the S&P 500. Rails have been a bright spot, Wolfe said, rising 1.8 percent on average since the first rate cut.
And while Wolfe said he sees overcapacity continuing to plague the trucking sector in the near-term, he noted the rails should benefit from better rates and optimistic long-term expectations.
Among major railroad operators, Union Pacific Corp. fell 27 cents to $125.21, while shares of Burlington Northern Santa Fe Corp. gained $1.55 to $87.04. Norfolk Southern Corp. added 19 cents to $50.50.
In the trucking sector, YRC Worldwide Inc. rose 20 cents to $22.08, and Con-way Inc. lost 7 cents to $41.88.
Arkansas Best Corp. fell 15 cents to $25.79, and Universal Truckload Services Inc. slipped 55 cents, or 2.9 percent, to $18.58.