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Norfolk Southern outlook drags down railroad stocks

Railroad operator Norfolk Southern (NSC) is sinking after the company last night said that its third quarter earnings per share, or EPS, would be significantly lower than expected. The shares of other railroad operators are also declining on the news. Norfolk Southern explained that decreased coal and merchandise shipments would lower its revenue this quarter by about $120M compared with the same period in 2011. Meanwhile, higher fuel prices are hurting the company's bottom line. Moreover, the company's fuel surcharges lagged the increase in its fuel prices this quarter, Norfolk explained, adding that its revenue from fuel surcharges will decline by about $80M this quarter versus the third quarter of 2011. The railroad operator predicted that its third quarter EPS would be $1.18-$1.25, versus analysts' consensus estimate of $1.64. In mid-morning trading, Norfolk Southern declined $5.30, or 7.29%, to $67.39. Other railroad operators also fell, with Union Pacific (UNP) losing 3.17% to $121.09, CSX (CSX) slumping 3.86% to $21.91, and Kansas City Southern (KSU) falling 2.68% to $77.