http://www.todaysfinancialnews.com/investment-strategies/investors-ignore-the-risk-of-the-railways-7406.html Today's Financial News offers an independent and very practical perspective on the U.S. and global investment markets. We filter out exactly what financial news is worth paying attention to... and what it means for your money and portfolio Tue, 26 Jan 2010 12:08:21 -0500 http://wordpress.org/?v=2.8.5 hourly 1 http://www.todaysfinancialnews.com/investment-strategies/investors-ignore-the-risk-of-the-railways-7406.html#comment-2525 Mark in St Louis Wed, 28 Jan 2009 16:41:09 +0000 http://www.todaysfinancialnews.com/?p=7406#comment-2525 Mr. Snyder's analysis is right on the money for future earnings of the railroads. As fuel prices decline so will revenues as the railroads fuel surcharges are lowered. Surface Transportation Board requires RR's to lower these surcharges when fuel prices drop. Besides, the truckers will eat away at intermodal traffic if railroads are not competively priced (note: trucking companies are not seeing these large percentage declines in traffic). Also be aware that rail freight traffic for many products like lumber and auto parts is down 40% or more and may not recover for quite a while as the housing and auto industries are in long term depression. One bright spot for railroad's cost structure is that much of their locomotive and car fleets are leased and the maintenance contracted out, so these costs can be quickly eliminated from the balance sheet. Mr. Snyder’s analysis is right on the money for future earnings of the railroads. As fuel prices decline so will revenues as the railroads fuel surcharges are lowered. Surface Transportation Board requires RR’s to lower these surcharges when fuel prices drop. Besides, the truckers will eat away at intermodal traffic if railroads are not competively priced (note: trucking companies are not seeing these large percentage declines in traffic).
Also be aware that rail freight traffic for many products like lumber and auto parts is down 40% or more and may not recover for quite a while as the housing and auto industries are in long term depression. One bright spot for railroad’s cost structure is that much of their locomotive and car fleets are leased and the maintenance contracted out, so these costs can be quickly eliminated from the balance sheet.

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