Furthermore, the current energy shortage could mean increased coal shipments in the first half of this year, and those shipments could offset effects of a general economic decline. Kauffman cautioned that the slowing economy could translate into reduced earnings in the first and second quarter for some railroads. Nevertheless, by the second half of the year freight stocks could begin to rise, he said in the Jan. 4 report. This is a buying opportunity. None advises selling, though it is exceedingly rare for brokerage firms publicly to recommend selling.
Railroads have to ship freight in order to make money.
When the economy is weak, freight shipments are weak. Norfolk Southern faces additional pressure because the coal market continues to be weak as well. Though analysts are forecasting better times by midyear, the railroad will still have to weather whatever economic storms gather between now and then. Also, the Surface Transportation Board, which blocked a merger attempt between Burlington Northern Santa Fe and Canadian National, is expected to lift a merger moratorium and implement new merger rules in June. There is rampant speculation that not only will a new round of industry consolidation begin afterward, but also that Norfolk Southern will be involved in that consolidation.