Investopedia: CSX On Target, But Hard To Find A Reason To Pay Up

Although rail stocks have come a bit off their highs, particularly the eastern operators, Wall Street still remains pretty bullish on the prospects of rail continuing to take share from trucking. With that, an in-line quarter for CSX (NYSE:CSX) isn't likely to change the story much in either direction. Improvements in the coal business next year, a continued housing recovery, and ongoing growth in the intermodal business should all lead to better volume and operating profits, but the stock's valuation indicates that Wall Street is already counting on that happening.

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Investopedia: CSX Adapating To New Realities

It wasn't long ago at all that the rails seemed to have things pretty much all going their way. Better management was producing better margins, pricing advantages over trucking were leading to good intermodal growth, and a recovering economy was supporting higher traffic and strong pricing. Then came a structural shift in electricity generation and a serious drought that hammered both coal and agricultural volumes.

To its credit, eastern rail operator CSX (NYSE:CSX) is rolling with the punches. The company is largely through the worst of the volume reset caused by declining coal demand, and while management has stretched out its margin improvement targets, there's still a pretty good case to be made for solid operating performance over the next few years. Unfortunately, the market has been quick to anticipate this and the shares don't look like a tremendous bargain today.

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Investopedia: Rails Seem To Point To A Respectable 2013

Many analysts and investors have worried about the outlook for growth in the United States in 2013, but railroad data continues to suggest an ongoing recovery/expansion in the economy. Although it's true that the rails have enjoyed an uncommonly long stretch of good performance relative to the markets, ongoing demand growth could continue to support the sector.

December's Data Looks Very Familiar
The Association of American Railroads reported that U.S. rail carload volume declined about 4% for the month of December relative to the prior year, while climbing more than 2% from November's level.

As has been the case for quite some time, coal and grain traffic declines were a major negative influence on the results. Coal volume declined by more than 13%, while export declines tied to this year's drought helped fuel a 14% decline in grain carload traffic. Excluding coal, carload traffic was up more than 3%, while traffic excluding coal and grain climbed 6%.

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Investopedia: Should November's Rail Data Encourage Investors?

In many respects, November's rail carload data (as reported by the Association of American Railroads (AAR) in its monthly Rail Time Indicators report) is more of the same, only more so. United States railroads continue to see an ongoing erosion of coal business, but underlying industrial demand continues to be relatively positive. Although a host of U.S. industrial companies continue to express caution about demand for the first half of 2013, carload traffic suggests that there may not be as much downside risk as feared.

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Investopedia: ONEOK Backs Off The Bakken

A strange thing has happened in the ongoing development of the Bakken oil producing region of the United States. While more than a few writers and analysts have talked about producers in the Bakken region suffering from too little takeaway capacity, a large pipeline operator has canceled plans to build a pipeline that would have carried crude from the Bakken region down to the Cushing, Oklahoma hub. 

No Thanks, We're Fine

ONEOK Partners (NYSE:OKS) had planned to build the Bakken Crude Express Pipeline to connect multiple points in the Williston Basin (part of the Bakken formation) in Montana and North Dakota, a top oil producing state, to Cushing. The pipeline would have been about 1,300 miles long, carried about 200,000 barrels per day and covered much of the same territory as the Bakken NGL Pipeline project that is underway at a cost of around $1.7 billion.

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Investopedia: The Fiscal Cliff - The Good, Bad, And Ugly

Looming over the stock market, the economy, and the upcoming election is the specter of the so-called "fiscal cliff" - a collection of tax increases and spending cuts that will go into effect on Jan. 1, 2013 if Congress is not able to pass some sort of compromise. As economists and analysts are forecasting an impact to GDP from 2% to 5% in 2013, it's clearly a significant event for investors to consider. What then is the bull/bear scenario as the fiscal cliff approaches?

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Investopedia: Hub Group Could Deliver Value, But Mind The Margins

Done right, asset-light transportation/logistics services can be quite lucrative even if the reported free cash flow margins are thin. As one of the larger players in intermodal (and the largest asset-light intermodal company), Hub Group (Nasdaq:HUBG) is taking advantage of the same intermodal growth trends that have been helping rival J.B. Hunt (Nasdaq:JBHT) and boosting the performances of Class 1 railroads such as Union Pacific (NYSE:UNP) and Norfolk Southern (NYSE:NSC). Although Hub Group is vulnerable to a further macroeconomic slowdown and a margin squeeze between rail carriers and customers, there could be worthwhile value in these shares.

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Investopedia: Kansas City Southern Has The Growth, But Maybe Not The Value

Kansas City Southern (NYSE:KSU) is an odd duck in the railroad space. Although a Class 1 railroad, it's quite a bit smaller than the likes of Union Pacific (NYSE:UNP) or CSX (NYSE:CSX). Likewise, it often seems to be overlooked - more than a couple of analysts who cover the major rails don't cover Kansas City Southern. On the other hand, this company has uncommonly strong growth prospects, but a valuation to match.

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Investopedia: Union Pacific Already Rewarded For Its Quality

As I mentioned the other day in discussing CSX's (NYSE:CSX) earnings, good companies show their qualities when times get a little tougher. With that in mind, there's little to suggest that Union Pacific (NYSE:UNP) ought to be dethroned as the best railroad at the moment. While the company's pricing and operating expense control is laudable, it's worth asking how much of a premium investors should pay for a best-in-class operator facing some near-term macroeconomic challenges.

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Investopedia: In Challenging Times, CSX Shows Its Qualities

It's no understatement to say that the earnings warning from Norfolk Southern (NYSE:NSC) spooked investors in the rail sector and focused a great deal more attention on fellow East Coast operator CSX (NYSE:CSX). And yet, a company that still carries historical baggage from below-peer operating performance managed to deliver a satisfactory quarter. Although this rail company is still vulnerable to weakness in coal volume, it may not be a bad pick for investors who want to make a leveraged play on a better economy.

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Investopedia: September Rail Data - Coal Still Weak, Are Industrials Next?

With another month in the books, U.S. railroad traffic still seems to fit and support a "cautiously optimistic" sort of outlook. Traffic growth is absolutely down relative to the post-recession recovery, but still continues to push in a positive direction. That said, data pointing to a slowing U.S. economy have started worrying investors in these stocks - while the Dow Jones U.S. Railroads Index is up more than 20% over the past year, September was a rough month.

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Investopedia: FedEx May Be In Sight Of Bargain Pricing

I've been a FedEx (NYSE:FDX) skeptic for some time now, and despite a few spikes in February and March, the stock has mostly chopped around in 2012 as investors try to digest the impact of slowdowns in Europe and China on global transportation. Although I still believe that FedEx enjoys too much benefit of the doubt with the sell-side analyst crowd, I do acknowledge the value in this company's nearly impossible-to-replicate infrastructure and its leverage to an eventual economic recovery. Overall, maybe FedEx is getting within sight of being attractively valued.

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Investopedia: Rail Traffic Perks Up A Bit

The August edition of Rail Time Indicators from the American Association of Railroads once again offers investors an interesting read on several trends in the North American economy. Although the ongoing declines in coal traffic are still a revenue risk for Class 1 operators like Union Pacific (NYSE:UNP) and Norfolk Southern (NYSE:NSC), the underlying improvements in industrial traffic are encouraging for the economy as a whole.

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Investopedia: July Rail Data Shows Some Reasons For Worry

The month-by-month rail data provided by the Association of American Railroads through the monthly Rail Time Indicators publication has always been something to take with a grain of salt - one month doesn't make a trend and no trailing data report can ever tell an investor what's about to happen. All of that said, data is now flashing a strong yellow and investors in transportation stocks, not to mention industrial and resource stocks, should approach these companies with some caution. 

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Investopedia: Genesee's Bold Bid To Be The Leading Short-Line Operator

It's always interesting to see how nimble and well-managed companies can prosper by zigging when larger rivals zag. Class 1 railroad operators like Union Pacific (NYSE:UNP) and Norfolk Southern (NYSE:NSC) have spent the last three decades selling off their short-line operations in response to the Staggers Act, while short-line specialist Genesee & Wyoming (NYSE:GWR) has been busy buying short-line rails and building itself into one of the premier operators.

On Monday, Genesee announced a major expansion of that strategy - agreeing to acquire fellow short-line operator RailAmerica (NYSE:RA) for $27.50 per share or about $1.4 billion overall. This is a very sizable deal for Genesee & Wyoming and one of those bold moves that will either vault the company to a new level of operating performance or saddle the company for years with debt and non-synergistic assets.

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Investopedia: CSX In Solid Shape Despite Weak Coal

Given how often data is reported about the railroad industry, there aren't too many secrets or surprises in the industry. In the case of CSX (NYSE:CSX), for instance, pretty much everybody knew going in that coal numbers were going to look pretty bad, but that other categories like automobiles and intermodal would help the overall numbers. Even with the operational challenges created by lower coal traffic, CSX is doing a good job of improving its operating performance.

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Investopedia: June's Rail Traffic A Bit Of History Repeated

Rail traffic data, as reported by the Association of American Railroads' "Rail Time Indicators," continues to show sluggish, but still very real growth in the industrial economy of the United States. Conditions are not great, as weaker coal and grain demand continue to impact total volume, but they are at least supportive of a cautious optimism on the overall U.S. economy.

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Investopedia: Once Again, Rails Suggest Summer Slowdown Isn't That Bad

This summer is starting to feel a lot like last year. Europe seems to be coming apart at the seems, volatility is tracking up, and investors are on the hunt for proof that the economy is sliding back toward recession. Like last year, though, the data from the Class 1 North American railroads just doesn't support a panic scenario. Yes, business activity is leveling off, but that's what usually happens in the summer and there doesn't seem to be a compelling reason to hit the big red button just yet.

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Investopedia: Investors Want Nothing To Do With Cloud Peak Energy

Warm winter weather and low natural gas prices have gutted the coal market in the United States. Utilities like American Electric Power (NYSE:AEP) are switching over as much production to natural gas as they can, while railroads from Union Pacific (NYSE:UNP) to CSX (NYSE:CSX) are reporting sharp drops in coal carloads. That is leading coal producers like Peabody Energy (NYSE:BTU) and Cloud Peak Energy (NYSE:CLD) to cut production, and leading investors to fret about the near-term outlook for EBTIDA.

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Investopedia: Rails Struggling To Replace King Coal

Investors still seem fully invested in the idea of ongoing economic recovery, but maybe that is starting to fade a bit. Not only have investors had to digest disappointing news on job growth, but rail traffic and other economic numbers are starting to look a little wobbly. The question for rail investors, then, is whether there's enough momentum left to replace the ongoing weak demand for coal.

March Numbers Look Familiar
"Ex-coal" has become an important qualifier when looking at recent railroad traffic data, and March was no exception. U.S. rail traffic dropped almost 6% on a year-over-year basis, and over 3% month-over-month for March. Ex-coal, the comparison improves to 2.4% (year over year) and ex-coal and ex-grain, it jumps further to 4.4%. While that's all well and good for the economy, the fact remains that lower carload volume is a headwind for rail operators.

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