(The Associated Press circulated the following on March 17, 2009.)
NEW YORK — Railroad stocks wavered Tuesday, after an analyst cut his profit forecasts across the group for this year and next, but said this still might be a good time for investors to jump in.
Stifel Nicolaus analyst John Larkin reduced his earnings estimates by about 12 percent across the board for both years, citing weaker-than-expected traffic on the tracks so far this year.
Through the first nine weeks of 2009, overall North American rail traffic has fallen 16.1 percent, Larkin said. He predicts traffic will fall by 9.5 percent this year and grow by a modest 2.1 percent in 2010.
Although Larkin sees sluggish freight volumes continuing for some time, he said it might be an ideal time for investors to buy some of the best-valued North American rail stocks. He recommends Norfolk Southern Corp., Canadian National Railway Co., Canadian Pacific Railway Ltd. and the largest U.S. railroad – Union Pacific Corp.
Larkin said he thinks investors have overreacted to the possibility the industry will be re-regulated, as well as the potential for stiffer competition.
In midday trading, Union Pacific gained 32 cents to $39.25 and Kansas City Southern added 12 cents to $14.82. Norfolk Southern gained 4 cents to $31.08.
The rest of the group was in the red, with Burlington Northern Santa Fe Corp. losing 29 cents to $56.85 and CSX Corp. slipping 28 cents to $24.36. Canadian Pacific lost 44 cents to $29.65, and Canadian National gave up 39 cents to $34.22.