Rail execs remain bullish for 2011

March 25, 2011

Railroads are expecting an even stronger second quarter in 2011 following a 5 percent increase in carload volume during the first three months of 2011, carrier executives told a J.P. Morgan financial conference in New York March 24.

This prediction comes on top of strong profit gains in 2010 that saw multiple stock dividend increases and what one Wall Street analyst called “the best year-over-year growth [in traffic volume] in more than 50 years.”

Railroad executives are especially bullish on steam and coking coal traffic for the remainder of 2011 given Japan’s considerble loss of nuclear power generation and expected future dependence on coal-generated power and need for steel production in the rebuilding process.

“We feel good about 2011,” said Norfolk Southern CEO Wick Moorman. “We anticipate solid growth in everything except anything that’s housing-related.”

Union Pacific Chief Financial Officer Rob Knight predicts “solid growth in quarterly operating income.”

CSX Chief Operating Officer David Brown said his railroad expects traffic volume to outpace the U.S. economy, with coal traffic up as much as 10 percent or more.

The railroads also predict a continued shift from highway to rail as trucking companies deal with rapidly escalating diesel fuel prices and highway congestion.

The Association of American Railroads reported March 24 that carload traffic was up more than 5 percent for the first quarter 2011, with intermodal (trailers and containers on flat cars) up more than 8 percent in the first quarter.