Freightwaves is reporting that Goldman Sachs has revised its outlook on 2020 earnings in the freight transportation sector. The reason is the continued sluggishness in the U.S. economy’s industrial sector, and their expectation that existing weakness will mimic previous sluggish industrial periods, lasting up to seven months. The bottom line is that Goldman Sachs does not expect industrial recovery to occur until sometime after March 2020. Previously, the company expected some growth in the freight sector during the first six months of 2020.
Jordan Alliger, a Golden Sachs analyst, said “it is just tough to ignore ongoing softness in weekly rail carloads (economically sensitive carloads -3.3% in 3Q – worsening from +0.9% in 2Q), taken together with two consecutive months of ISM below 50.” (Ed. note: “ISM” refers to the Institute for Supply Management’s Manufacturing Index, which is a key indicator of the strength of activity in the manufacturing sector. A measure of greater than 50 means expansion, 50 is flat, and less than 50 is a reduction).
Among the companies the investment firm says will have lower earnings per share than originally predicted are five of the seven Class 1 railroads – CSX, Canadian National, Canadian Pacific, Norfolk Southern, and Union Pacific. Other freight companies are also included in the group.
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