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Earnings Preview: Major US freight railroads

Josh Funk, Associated Press

OMAHA, Neb. (AP) -- The nation's biggest freight railroads will begin shipping their third-quarter results to investors this week, and the reports will offer more details about the pace of the economy before the federal government shutdown.

But the quarterly reports only go through the end of September, so they won't reflect the impact of this month's federal spending stalemate in Washington D.C.

CSX Corp. will report third-quarter earnings on Tuesday. Union Pacific Corp., the largest U.S. freight railroad, will release its report on Thursday. Norfolk Southern Corp. will report earnings on Oct. 23.

BNSF, which is one of the other major U.S. freight railroads, is part of Warren Buffett's Berkshire Hathaway Inc., which will release its results on Nov. 1.

WHAT TO WATCH FOR: Weak coal demand has weighed down railroad profits over the past two years as cheap natural gas prices prompted many utilities to switch fuels.

Earlier this year, it appeared that coal demand had begun to stabilize at lower levels. But this month Union Pacific warned that its third-quarter profit would fall short of Wall Street's expectations because of weak coal shipments and last month's flooding in Colorado.

Railroad executives had predicted that utility coal demand might return to normal patterns by the end of this year if power plants burned through much of their coal stockpiles. Credit Suisse analyst Allison Landry said that the normal to hot summer railroads wanted didn't materialize, so coal demand could remain weak in 2014.

Landry said demand for the industrial products railroads haul appeared relatively strong in the quarter.

And the number of crude oil shipments railroads deliver continues to grow because more oil is being produced in parts of the United States that lack pipeline capacity.

The Association of American Railroads said the number of carloads of petroleum products hauled by U.S. railroads soared 37 percent to 524,766 through the first nine months of the year because of the surge in crude shipments.

WHY IT MATTERS: Investors watch major freight railroads closely because they are considered gauges of the nation's economic health. Railroads carry cars, chemicals, fuel, crops, lumber and containers of imported goods across the nation, so their earnings reflect the health of many industries.

WHAT'S EXPECTED: Analysts surveyed by FactSet expect CSX to report earnings per share of 42 cents on $2.95 billion in revenue.

Several analysts reduced their forecasts for Union Pacific after the railroad warned earlier this month that its earnings would fall between $2.45 and $2.48 per share. Analysts now predict Union Pacific will report earnings of $2.48 per share on $5.61 billion revenue on average. Previously, analysts had predicted Omaha, Neb., based UP would report earnings of $2.56 per share.

Analysts predict Norfolk Southern will report earnings per share of $1.39 on $2.77 billion revenue.

LAST YEAR'S QUARTER: The Jacksonville, Fla.-based CSX earned $455 million, or 44 cents per share, a year ago on $2.89 billion revenue.

Union Pacific reported $1 billion in net income, or $2.19 per share, a year ago on revenue of $5.34 billion.

Norfolk Southern, which is based in Norfolk, Va., reported $402 million net income, or $1.24 per share, on $2.7 billion revenue.


Follow Josh Funk online at www.twitter.com/funkwrite



CSX Corp.: www.csx.com

Union Pacific Corp.: www.up.com

Norfolk Southern Corp.: www.nscorp.com

BNSF Railway: www.bnsf.com

Berkshire Hathaway Inc.: www.berkshirehathaway.com