SOURCE: Five Star Equities
NEW YORK, NY--(Marketwire - Aug 6, 2012) - Despite facing a significant drop in coal shipments, railroad stocks have performed admirably in 2012. The Standard and Poor's 500 Railroads Index (S5RAIL) is up roughly 10 percent for the year, slightly beating the S&P 500 Index gain of 9 percent. Five Star Equities examines the outlook for companies in the Railroads Industry and provides equity research on CSX Corporation (NYSE: CSX) and Norfolk Southern Corp. (NYSE: NSC).
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The railroads have surprisingly benefited from the very industry responsible for the steep decline in coal shipments. The recent boom in hydraulic fracturing has resulted in railroads transporting more equipment, and petroleum products to and from shale formations for energy companies. Warren Buffett-owned Burlington Northern Santa Fe railroad has seen a 75 percent increase in petroleum carloads, while Union Pacific has seen a 12 percent rise in their fracking-related freight.
"This is a whole industry that just sprung up on all the rail properties," Sterne Agee & Leach Inc. analyst Jeffrey Kauffman stated in a recent telephone interview. "It's a new growth source that helps to mitigate what's probably a temporary dislocation of an old energy source."
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CSX Corporation, based in Jacksonville, Fla., is one of the nation's leading transportation companies, providing rail, intermodal and rail-to-truck transload services. The company recently reported that for the second quarter of 2012 operating income improved to $943 million. CSX shares are up nearly 10 percent for the year.
Norfolk Southern recently completed $20.5 million of track, bridge, and signal improvements along its major coal line through the Monongahela Valley in a record seven days. In 2011, nearly 37 million tons of coal was shipped over the line -- most of it delivered to utility customers. Approximately 30 trains daily use the line.
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