Union Pacific Earnings Help Put Rail Stocks Back on Track -- Update
July 18 2019 - 5:17PM
Dow Jones News
By Jessica Menton
Shares of U.S. railroad operators were on the mend Thursday
following a better-than-expected earnings report from Union
Pacific, easing investor fears over a trade-related slump among
freight rail giants -- for now.
Shares of Union Pacific climbed 5.9% Thursday, their best day
since Jan. 8, as the company reported profit growth in the second
quarter despite shipping less cargo. That compared with a 0.4% rise
in the broader S&P 500. The gains helped cut some of the
company's recent losses after rival CSX Corp. raised concerns among
investors over the health of the economy after cutting its annual
outlook Tuesday, pummeling shares of other railroad operators
earlier this week.
CSX's stock ticked up 0.6% Thursday, after dropping 10% a day
earlier -- its biggest one-day percentage loss since October 2008.
Meanwhile, shares of Norfolk Southern Corp. rose 2.5% after sliding
7.5% Wednesday, their largest daily drop since September 2012.
Freight railroads have struggled in 2019 amid trade tensions and
growing uncertainty over the health of the economy. Mixed reports
from CSX and Norfolk Southern this week also sent conflicting
signals to investors on the health of the industrial economy
following recent upbeat economic data on employment and consumer
spending.
"Weekly railroad volumes have been weak, and that's a real-time
indicator of the economy," said David Vernon, vice president and
senior analyst at Sanford C. Bernstein. "Transportation data has
been weak, but there's been a bifurcation between the freight
economy and the consumer economy."
Union Pacific still faces demand headwinds this year, though
some analysts said that could be from factors specific to the
railroad sector and not related to the broader economy. It faces
tariff issues and weather-related problems such as flooding. The
company forecast freight volumes would be down about 2% in the
second half of the year following a 3% drop in the first half.
Write to Jessica Menton at Jessica.Menton@wsj.com
(END) Dow Jones Newswires
July 18, 2019 17:02 ET (21:02 GMT)
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