(The Associated Press circulated the following on June 6.)
NEW YORK — Shares of the nation’s largest freight railroad operators traded lower on Wednesday, after an executive at eastern carrier Norfolk Southern Corp. reported that its freight volumes so far this year are down nearly 4 percent.
Shares of Norfolk Southern fell $1.13 to $56.84 in midday trading, while shares of eastern rival CSX Corp. retreated 99 cents, or 2.2 percent, to $44.94. Shares of Union Pacific Corp., the nation’s largest railroad, gave up $1.58 to $119.40 and shares of its rival in the west, Burlington Northern Santa Fe Corp., fell $1.72 to $91.18.
The activity came after Norfolk Southern Executive Vice President Don Seale told analysts earlier in the morning that economic headwinds continue to affect its freight volumes.
Seale said in a Webcast he agreed with popular sentiment that says the U.S. economy currently lies “somewhere between resumed growth and recession.” He said freight volumes at Norfolk Southern so far this year are down nearly 4 percent.
Railroad operators have experienced tremendous pricing power in recent quarters, driven by their competitive advantage over truckers.
Norfolk Southern, for example, has witnessed 18 straight quarters of pricing gains, based on revenue per carload, and like some other railroads a fair piece of its business goes up for re-pricing this year.
That is seen as a key reason why billionaire Warren Buffett’s company, Berkshire Hathaway Inc., recently took significant positions in three freight railroads, including Norfolk Southern.
But slowdowns in the automotive and housing industries finally caught up with railroads this year and most operators reported softer volumes in the first quarter. Harsh weather also played a role, Seale said, and railroads also face tough comparisons to a brisk first half of 2006 that benefited from hurricane relief efforts.
But Seal said Norfolk Southern has found support in its intermodal business, although those volumes still remain off last year’s pace, and grain volumes remain high on demand for ethanol and fertilizers.
Chemical volumes have also begun to rebound, the executive said, adding that his company “remains cautiously optimistic” that the second half of their year will provide a better operating environment.
Elsewhere in the sector, shares of Canadian Pacific Railway Ltd. fell 93 cents to $71.99 and shares of Canadian National Railway Co. lost 97 cents to $54.16. Shares of Kansas City Southern gave up 89 cents, or 2.1 percent, to $41.16.