Evening star., 1924-11-09
SOARING Of RAILS
MAY Be 0VERDONE
Certain Advance in Values Is
Justified by Traffic and
Recent Earnings.
ELECTION ALSO HELPFUL,
Wise Investors Will Discriminate
Between Securities of Various
Carriers.
ALSO HELPFUL.
BY GEORGE It. HUGHES
Special Dispatch to The Star

BY GEORGE T. HUGHES.
Special Dispatch to The Star.
NEW YORK, November S.-This
post election week has witnessed 4
remarkable reversal of sentiment to-
ward railway securities. Buying of
both stocks and bonds for investment
as well az speculative account, has
gone on at a rate unequaled in this
particular class of security in years
The reason for this about-face is
not hard TO find. Primarily it is the
assurance with both Wall Street and
the outside public now have that
the railroads are not to be subjected
to legislative harassing. Looking
back over the year just passed, il is
quite plain now that the chief cause
OF dIstrust as to the safety of rail
road obligations has been politica
uncertainty. once this was removed
the market set about readjusting
quotations more nearly to actual
values Perhaps the readjustment
was overdone. 1t generally is, in
times of speculative enthusiasm.
Nevertheless, for the most part. the
new price levels were warranted
Facts Bearing on Values
To establish this conclusion it is
only necessary TO consider d. few
Saliant facts. First and foremost
comes the traffic record. In the week
ending October 26 the latest for
which statistics are available, the
carriers established a new high rec
ord for all time in the number Of
cars loaded with revenue freight.
The exact figure was 1,112,345 cars
which surpassed by 10000 the previ-
Gus high record established the week
before. So for two successive weeks
the railroads have moved more freight
than at any previous time in their
history. These records were made
it is also important to note, during
a period of doubt and hesitation in
many lines of industry The chief
gains were made in the numbers OF
cars loaded with grain and grain
products and with miscellaneous
freight.
Railroad Incomes Larger.
So much for the amount of bust
ness done. Now as to income re-
suits. For this we have to take the
September records. According to the
Bureau OF Railway Economics, class
l roads had operating revenues dur
ing this month amounting to $3.50
741,O00. a decrease of s5,225,000, or
per cent, from September a year ago.
Operating expenses were s3S1.573,750,
a decrease OF s35052, 400, which was
S.4 per cent below that of the same
month in 1923. Thus it will be seen
that, while gross revenues are on, ex-
penses were cut down in greater de-
gree and the net result was an in
crease in operating income. If these
figures prove anything. it is that the
railroads have their expenses under
control and are showing an increaS-
ing ability to operate at d profit.
Special Study Needed.
1t remains to examine the relation
of these earnings to property invest
ment. Without going into detail as
to the figures, the net operating in
come of the class / roads for the first
nine months Of the year was at the
annual rate of 4.2] per cent on prop
erty value compared with 4.62 per
cent in the same period in the pre-
ceding year. This. it Will be seen, is
far below the rate allowed by the
present railroad law popularity known
as the Esch-Cummins Act In other
words, the railroads would have to
show larger profits before a cut in
rates would be forced under provision
by the act.
All these are matters of a very gen
eral bearing. They apply to the rail-
way problem as whole and not to
the status of any particular road.
Wise investors will discriminate
among the stock and bonds of vari-
Gus carriers. 1t is true that the mar
ket this week was not in a discrim-
mating mood, but that will come
later.
As To Dividend Rates.
1t will not do to assume that every
dividend paying railroad is about to in
crease its rate or that every nom
dividend paying road is about to or
der initial disbursement. Doubt
less there will be instances of both,
but there will also be disappoint-
ments. Nor is it safe to take it for
granted that all the mergers that
Wall Street has been talking about
are going to be successes. The mere
fact that one road is combined with
another is not going to work a mir
acle overnight.
The railroads have many and seri-
Gus problems to solve. one of which
is the diversion of transcontinental
traffic to the al-Water route through
the Panama Canal, and another is
the menace of bus and truck compe
tition. For the minute carloadings
being what they are, these problems
are not pressing, but they may be-
come so. One more caution. In the
long run the railroads Will prosper
in about the same degree as the rest
of the country and no more.
Higher Money Hardly Likely.
So much attention has been con-
centrated this week upon the specu-
lative and semi-speculative railroad
obligations that the highs grade pure
ly investment issues have been ne
elected. There have been some signs
of a hardening in money rates not -
simply money on call, but time funds.
The only effect on the bond market
has been a sagging tendency in United
tltn 1ar,f A Of
are off slightly on the week. The
savings bank railroad mortgages,
however, have been practically un
changed. There is no reason to be-
lieve that this trend toward high
er rates in money will go very far.
In any case, the records show that
the high prices for bonds come u
long time after the turn in the money
market.
inkt kr Gnnsalidatad Cd