Ever since the North American railroad operators triumphantly declared a bottom their industry one year ago, these smooth behemoths of efficiency have translated marginal economic stabilization into remarkably robust earnings growth.
My top pick in the sector has earned its keep once again. Canadian National Railway
Expressing optimism for a "continued economic recovery," Canadian National revised its full-year earnings guidance to C$4.05 per share, representing a 25% improvement over 2009. By contrast, rival Union Pacific
The best trains are the ones you see coming
This powerful parade of earnings from North American railroads was foretold from sea to shining sea.
Ever since robust first-quarter results prompted steelmaker AK Steel
For Fools adept at reading tea leaves, even the relatively steady rise in shares of Ford
Fortunately, for Fools seeking to corroborate their macroeconomic hunches, timely data on freight volumes is available to investors through sources like the Association of American Railroads or Atlantic Systems' Railfax. I scour these tools weekly to spot trends in freight demand, and I encourage curious Fools to try them out.
What are the numbers saying?
Corroborating the whispers of deteriorating industrial demand circulating throughout the bellwether sectors, recent railroad freight data show a recent but noteworthy reversal of what had been a long-standing stabilization trend. Baseline traffic has quickly reverted down to near- prior-year levels, and so far in this third quarter consolidated traffic has only been 6.7% above prior-year volumes. Interestingly, Canadian National's own full-year guidance calls for carload percent growth in the mid-teens, which is significantly less than the 27% increase for the second quarter.
How steep the grade of this recent reversal may be, I can not say, but I trust that diligent Fools will keep their eyes on the data.