Rail Traffic Points To An Ongoing Recovery

For the pessimist crowd of economists looking for a double-dip recession, rail traffic is proving to be a decidedly inconvenient truth. With November numbers in hand, it is pretty clear that the industrial sectors of the North American economy are continuing a slow (and decidedly unspectacular) recovery. Although the pace of growth is clearly moderating, traffic and utilization suggests that the major rail carriers can continue to see solid demand for the near future and that is a positive look-through for the economy as a whole. 

The Details of November
According to the Association of American Railroads' Rail Time Indicators, U.S. rail traffic grew 4.5% in November, while intermodal traffic increased 11.3%. On a sequential basis, seasonally adjusted traffic fell 1.1% from October, while intermodal was down 0.4%. It should be noted that an October-November decline is normal and completely consistent with the trend of past years. Once again, though, Canada was even stronger, as rail traffic rose more than 5% and intermodal increased 13%. (For more, see Railroad, Trucking Earnings Growth Set To Keep Rolling.)

Once again, rail traffic performance was broad-based. Although agricultural products and auto traffic were both down, that again is normal for this time of year. In other words, there is no particular reason for investors in Ford (NYSE:F), Toyota (NYSE:TM) or Archer Daniels Midland (NYSE:ADM) to see any bad news in these numbers.

Of more interest to this analyst was the performance of coal. To give investors an idea of just how important coal is to the railroad industry, remember that coal represented 46% of total American railcar traffic in November. So while there are differences between Union Pacific (NYSE:UNP), Norfolk Southern (NYSE:NSC) and CSX (NYSE:CSX) in terms of the exact breakdown of their traffic, coal is important to everybody.


The following link leads to the full piece at Investopedia:
http://stocks.investopedia.com/stock-analysis/2010/Rail-Traffic-Points-To-An-Ongoing-Recovery-GWW-UNP-RAIL-ARII-NSX1210.aspx