(The Associated Press circulated the following on September 26.)
NEW YORK — Shares of major railroad operators rose in trading Wednesday, as Canadian National Railway Co. agreed to the $300 million acquisition of a Midwest regional rail company, continuing consolidation in the sector.
Canadian National said early Wednesday it will take over a majority of the assets of railroad Elgin, Joliet and Eastern Railway Co. from a subsidiary of United States Steel Corp.
Meanwhile, Citi (NYSE:C) analyst John Kartsonas raised 2008 earnings estimates for Canadian Pacific Corp. and Union Pacific Corp., citing the two major railroads’ volume growth during a period of poor demand across the sector.
He now expects Canadian Pacific to earn $1.16 per share for 2008, compared with a previous estimate of $1.09 per share. The company earlier this month purchased Dakota, Minnesota & Eastern Railroad Corp., the largest U.S. regional rail operator, for about $1.5 billion in cash.
Kartsonas forecasts Union Pacific will post profit of $1.73 per share, up modestly from a prior estimate of $1.72.
‘Although we maintain our view that the rails’ pricing power will remain strong in the face of strained freight transport infrastructure, weak volumes continue to have a significant impact on our probability outlook, a trend that should continue into next year,’ the analyst said in a note to clients.
Consequently, Kartsonas lowered 2008 earnings expectations on the remaining players in the ‘Big Six’: CSX Corp., Burlington Northern Santa Fe Corp., Norfolk Southern Corp. and Canadian National.
In early afternoon trading, shares of Canadian National Railway Co. (NYSE:CNI) rose 29 cents to $56.09. Canadian Pacific gained 83 cents to $68.65, while Union Pacific Corp. added $1.24 to $112.14.
Burlington Northern Santa Fe Corp. gained $1.01 to $82.57, and CSX Corp. added 90 cents, or 2.2 percent, to $41.58.
Kansas City Southern shares rose 43 cents to $32.94 and Norfolk Southern Corp. gained 93 cents to $52.44.