Like a snowball rolled from an alpine peak, evidence is gathering at breakneck speed suggesting a brisk reversal of fortune on tap for North America's beloved railway stocks.

The last of the major rail haulers to report fourth-quarter earnings, Norfolk Southern (NYSE:NSC) certainly appears to be right on track. The company delivered record net income of $452 million, a 13% increase from the prior year, and enough to beat analyst expectations. Robust profits have certainly characterized the sector for this round of earnings, but I believe forward-looking Fools will share my concerns for subsequent periods.

Let's take a moment to recap. Canadian National Railway (NYSE:CNI) beat estimates with a 20% increase to adjusted earnings. Burlington Northern Santa Fe (NYSE:BNI) reported a 23% boost in earnings per share, and CSX (NYSE:CSX) grew adjusted earnings 6% over the prior year. If all we looked at were earnings numbers, Fools might think Warren Buffett had struck pay dirt already with Berkshire Hathaway’s (NYSE:BRK-B) increased stake in Burlington Northern. Within each of those earnings releases, however, I highlighted a common set of variables that point to a dramatically different scenario developing like an avalanche.

The pitfalls ahead for railways are entirely macroeconomic in nature, and in no way reflect upon what are some extremely well-run companies (Norfolk Southern improved its operating ratio by 450 basis points to 67.5% in the fourth quarter). To date, rail companies were able to employ a number of lifelines to delay the impacts of an accelerating economic contraction. Lagging fuel surcharges kept prices relatively strong even as volumes declined. Strength in coal shipments has served to offset some horrid declines in freight volumes for automobiles, construction materials, and even grain. 

Those lifelines, however, have now been used. Fuel prices can scarcely drop further, and production cuts among coal miners will exacerbate volume declines that have reached troubling proportions over recent weeks. According to industry data, Norfolk Southern's overall freight volumes have averaged roughly 18% below prior-year levels over the past four weeks.

I believe that resumption of coal demand will ultimately toss another lifeline to rail stocks, and Norfolk Southern is positioned well with rail networks surrounding the prolific Appalachian region where companies like CONSOL Energy (NYSE:CNX) and Massey Energy (NYSE:MEE) operate. In the meantime, however, I think Fools would do well to step off the trains for a quarter or two.

Further Foolishness: