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Thursday, June 10, 2010

Barclays Capital: Strong 2Q earnings forecast for rails

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A Barclays Capital analyst said the nation's railroads are likely to report strong earnings in the second quarter as the economy recovers and they keep costs under control, the Associated Press reports.

Analyst Gary Chase said growing volumes, improving prices and strict cost controls should lead major railroads to report better-than-expected earnings for the April to June period.

U.S. railroads are a good investment, Chase said, as the economy continues to accelerate. They also aren't exposed to troubles in Europe, leaving fewer risks.

Chase said his favorite rail investment is Eastern railroad Norfolk Southern Corp. So far this quarter, shipping volume is better than Chase had expected, especially in the Eastern U.S. as exports pick up.

He thinks prices will continue to rise this quarter and for the rest of the year as demand improves. And costs appear to be under control, Chase noted, as hiring in the sector remains slow.

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