(The Associated Press circulated the following article on November 14.)
NEW YORK — Shares of the nation’s major railroads slid on Tuesday after executives at an industry conference offered a guarded outlook for the remainder of 2006 and into 2007.
Shares of Union Pacific Corp. fell $2.33, or 2.5 percent, to $90.22 in afternoon trading on the New York Stock Exchange. Also on the NYSE, shares of Norfolk Southern Corp. retreated $3.09, or 5.9 percent, to $49.59, and shares of Burlington Northern Santa Fe Corp. declined $2.32, or 3 percent, to $74.65.
Speaking at Citigroup’s transportation conference Tuesday morning, Norfolk Southern Senior Vice President James A. Squires said his railroad expects “mixed business conditions” for the rest of the year and into 2007, due to housing market weakness and declining auto production.
Squires also noted that Norfolk Southern carloads so far this quarter are down modestly from last year. As a result, the company expects revenue increases to moderate, reflecting tempered volume growth and tough comparisons against a strong performance during the same period a year ago.
“While we still see some economic expansion ahead, it may be less robust than what we saw in the first half of the year,” Squires told analysts in New York.
Railroads in the last 18 months have enjoyed some of the greatest pricing power in their history, fueled by demand for intermodal service, where mainly consumer goods are hauled between modes of transportation.
Railroads are also grabbing share from the trucking sector, where a driver shortage is keeping companies from putting additional trucks on the road. Railroads have also benefited from higher fuel surcharges.
Burlington Northern Chief Financial Officer Thomas Hund said pricing growth next year probably won’t match the 6 percent gain railroads enjoyed in 2006.
“It should moderate along with inflation and costs structures,” to 3 percent to 4 percent annually, he said.
Elsewhere on the NYSE, shares of CSX Corp. fell $1.02, or 2.8 percent, to $35.92 and shares of Canadian National slipped 61 cents to $46.82. Shares of Canadian Pacific dropped $1.19, or 2.1 percent, to $55.22.