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3 major freight railroads to report 4Q earnings

Josh Funk, AP Business Writer

OMAHA, Neb. (AP) -- Several major freight railroads will release their year-end earnings reports in the coming week, offering hints about the health of the nation's economy.

CSX Corp. and Norfolk Southern Corp. releases fourth-quarter earnings on Tuesday after the markets close. Union Pacific Corp., the biggest U.S. freight railroad, releases its fourth-quarter report on Thursday morning.

WHAT TO WATCH FOR: Coal remains a key concern for railroad investors because coal demand remained weak throughout 2012. Last year's mild winter combined with relatively low natural gas prices to undermine coal demand.

Some utilities switched their generators from burning coal to natural gas.

In addition to coal demand from U.S. utilities, eastern railroads are affected by demand for coal exports out of East Coast ports.

Jefferies and Co. analyst Peter Nesvold said in a research note that investors will closely watch data for export metallurgic coal, used for making steel, because demand for it has weakened in the uncertain global economy.

"Coal is likely to continue to dominate the investment debate at the rails for the foreseeable future," Nesvold said.

The nation's other big freight railroad, BNSF, is now owned by Warren Buffett's Berkshire Hathaway, and its results are reported as part of Berkshire's earnings reports.

WHY IT MATTERS: Major freight railroads' results are considered gauges of the nation's economic health. Railroads carry cars, chemicals, crops, lumber and containers of imported goods across the nation, so their earnings reflect conditions of many industries.

WHAT'S EXPECTED: Analysts surveyed by FactSet expect CSX, based in Jacksonville, Fla., to report earnings of 39 cents per share on revenue of $2.84 billion.

Analysts expect Norfolk Southern, based in Norfolk, Va., to post earnings of $1.19 per share on $2.67 billion in revenue.

And Union Pacific is forecast to report earnings of $2.15 per share on revenue of $5.30 billion.

LAST YEAR'S QUARTER: CSX reported a fourth-quarter profit of $457 million, or 43 cents per share, last year. That was up 6 percent over 2010 because the railroad was able to increase prices enough to offset lower volume, especially in coal, chemicals and agricultural products.

Norfolk Southern reported a 19 percent jump in fourth-quarter profit last year as volume increases and higher shipping rates boosted net income to $480 million, $1.42 per share. That's up from $402 million, or $1.09 per share, the previous year.

Last year Union Pacific reported a 24 percent rise in fourth-quarter net income because it hauled more cargo and increased prices. The railroad, based in Omaha, Neb., reported a profit of $964 million, or $1.99 per share. That was up from $775 million, or $1.56 per share, the previous year.