The economy appears strong to the major freight railroads that haul the products and raw materials companies rely on, but the lingering trade disputes could derail business if they continue.
Union Pacific and CSX railroads both sounded optimistic about the economy when they reported hauling 3 percent more carloads of freight in the fourth quarter. Norfolk Southern is scheduled to release its report Thursday afternoon.
“Our customers in discreet markets are in large part doing OK,” Union Pacific CEO Lance Fritz said Thursday. Shipments of steel, construction products, intermodal containers and a few other categories look particularly strong. “We think there is still opportunity for modest growth in the United States.”
Edward Jones analyst Dan Sherman said the railroads’ results won’t add much to fears that the economy is slowing down.
“There hasn’t been any indication at all that the economy is slowing even slightly,” Sherman said.
Union Pacific said its fourth-quarter net income jumped 29 percent to $1.55 billion, or $2.12 per share, and topped Wall Street expectations. The Omaha, Nebraska-based railroad benefited from strong demand and efforts effort to streamline its operations that began in October. The railroad has already stored 1,200 locomotives as it works to haul freight more efficiently.
Nearly all the major U.S. railroads are implementing some of the operating principles that have led to dramatic improvements in the profitability of rival CSX over the last two years.
CSX delivered $843 million in net income, or $1.01 per share, last week and promised to continue working to reduce costs and find ways to deliver more freight with fewer locomotives.
The number of carloads railroads carry is considered an indicator of the health of the overall economy because of the variety of goods rails deliver.