Railroad Stocks Getting Soggy

The images from the Midwest of livestock gathering on rooftops and submerged landscapes serve as a powerful reminder of the collective heartache this event has brought to countless residents, homeowners, farmers, and businesses across the region.

Among the larger businesses affected by the flooding, the nation's railways this week made it clear that this event will affect their results for the second quarter. Union Pacific (NYSE: UNP  ) indicated earnings will fall in the lower range of prior guidance, while competitor Burlington Northern Santa Fe (NYSE: BNI  ) lowered expectations to $1.30 per share. As if the floods weren't challenging enough, railroad companies are getting splashed by rising energy prices as well. Both Burlington Northern and Union Pacific cited fuel costs in their guidance updates.

Meanwhile, JPMorgan Chase analyst Thomas Wadewitz expressed continued optimism for the group over the longer haul. While lowering forecasts for the aforementioned rail companies, plus Norfolk Southern (NYSE: NSC  ) and CSX (NYSE: CSX  ) , he stated, "While the flooding will clearly hurt rail second-quarter earnings, the impact is largely temporary and does not meaningfully change the positive railroad pricing and earnings growth stories."

This Fool agrees, and I would add that one major rail company may look especially attractive in light of recent events. Although Canadian National (NYSE: CNI  ) operates key north-south rail lines through the flood-affected region, the company's main east-west lines run north of the Great Lakes and out of harm's way. If major line repairs drag on, Canadian National's alternative route could be a key advantage for intermodal shippers and provide unforeseen revenue.

Further Foolishness:

Buffett sees real value in railroads. If you're a Foolish miser for value like Buffett, try a 30-day free trial of the Motley Fool Inside Value newsletter service. Canadian National is a pick of the Motley Fool Stock Advisor service, which also can be taken for a test-drive.

Fool contributor Christopher Barker captains yachts and writes about stocks. He can be found in the CAPS community under the username TMFSinchiruna. He owns no shares in the companies mentioned. The Motley Fool has a disclosure policy.

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2/12/2010 4:01 PM
BNI.DL $100.21 Down +0.00 +0.00%
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