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Re: Norfolk Southern,up 3.3%, and Union Pacific 3.1%
Author: BOB2
Date: 12-07-2016 - 16:57
The market has been "forthy" lately. with lots of speculation, too. Stock prices are based on market expectations about the future..... And, as Jim Morrison, once quite rightly noted: "The future's uncertain, and the end is always near...".
RR earnings have held up quite well over the last couple of years, despite the energy bust. Which is where about 90 percent of the total lost traffic went. Cost cutting has offset those losses, which turned out to be high volumes, but also high in things like fuel, and overall O&M costs. RR's have held there own in most of the non energy commodity sectors reported in the AAR data, with only very small drops in intermodal, and even a few increases in aggregate, autos, and farm commodities.
Coal speculation may also be driving these two particular RR stocks up a little bit more than most. I wouldn't hold my breath(pardon the bad pun on that one), waiting for that traffic base to recover though.
For a while coal has also rallied somewhat, on speculation that politicians can magically make coal less costly than natural gas, and thus, on nonsense like that, trading in coal stock volumes has also soared. But, the rally has been weak, as many institutional investors keep dumping their coal portfolios into an aptly named "bull" market for coal stocks......
Cheap natural gas is here to stay for quite a while, even if energy prices do rally a bit for oil. There is a vast excess of energy supply worldwide, especially in cheap oil and gas, and oil prices, as a benchmark, are not likely to be going back to above $100 a barrel anytime soon. And, gas prices are still only a small bit above the recent record lows. So domestic coal use will continue to fall for domestic electrical production.
Increasing efficiency and cheap natural gas are killing the need to use coal for electrical generation, and the environmental benefits, can even be monetized as credits, and sold, making even more profits for utility stockholders, at no cost. So RR's will likely continue to haul less and less domestic coal. And so, even if we do get the short term bump in exports of "clean" American coal to China, as I hope and do expect to see more of, that is not going to produce that much additional RR traffic.
And, as another all time great wit once said: "The future ain't what it used to be........"
RR earnings have held up quite well over the last couple of years, despite the energy bust. Which is where about 90 percent of the total lost traffic went. Cost cutting has offset those losses, which turned out to be high volumes, but also high in things like fuel, and overall O&M costs. RR's have held there own in most of the non energy commodity sectors reported in the AAR data, with only very small drops in intermodal, and even a few increases in aggregate, autos, and farm commodities.
Coal speculation may also be driving these two particular RR stocks up a little bit more than most. I wouldn't hold my breath(pardon the bad pun on that one), waiting for that traffic base to recover though.
For a while coal has also rallied somewhat, on speculation that politicians can magically make coal less costly than natural gas, and thus, on nonsense like that, trading in coal stock volumes has also soared. But, the rally has been weak, as many institutional investors keep dumping their coal portfolios into an aptly named "bull" market for coal stocks......
Cheap natural gas is here to stay for quite a while, even if energy prices do rally a bit for oil. There is a vast excess of energy supply worldwide, especially in cheap oil and gas, and oil prices, as a benchmark, are not likely to be going back to above $100 a barrel anytime soon. And, gas prices are still only a small bit above the recent record lows. So domestic coal use will continue to fall for domestic electrical production.
Increasing efficiency and cheap natural gas are killing the need to use coal for electrical generation, and the environmental benefits, can even be monetized as credits, and sold, making even more profits for utility stockholders, at no cost. So RR's will likely continue to haul less and less domestic coal. And so, even if we do get the short term bump in exports of "clean" American coal to China, as I hope and do expect to see more of, that is not going to produce that much additional RR traffic.
And, as another all time great wit once said: "The future ain't what it used to be........"
