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Sector Snap: Railroads

NEW YORK (AP) -- Shares of railroads fell Wednesday after CSX Corp. said it expects profits to be relatively flat this year.

The Jacksonville, Fla.-based railroad said that after a lackluster 2013, it expects its earnings to grow 10 to 15 percent in 2014 and 2015, once coal shipments stabilize.

The company also said that it plans to boost its quarterly dividend by a penny to 15 cents per share in June, and the railroad's board approved spending $1 billion to repurchase CSX stock.

Citi analyst Christian Wetherbee, who backed his "Buy" rating for CSX's stock, said that in light of the company's strong first-quarter results, its prediction of flat results for 2013 implies a drop in profit in the second half of the year. As a result, the 2013 guidance seems "cautious and a bit conservative," he said.

Coal demand continues to be a concern for CSX and other railroads because relatively low natural gas prices have prompted some utilities to switch from coal to gas, while the sluggish economy has hurt industrial demand for coal.

CSX said coal revenue fell by 13 percent to $726 million in the first quarter as it delivered less to utilities. But exports of metallurgical coal, used in steel making, rose to 7 million tons over last year's 6.3 million tons.

Sterne Agee analyst Jeffrey Kauffman also backed his "Buy" rating for CSX, calling the company's results a "solid start" to railroad earnings season. He noted that while coal volumes continued to fall during the quarter, the pace of the decline slowed.

CSX was the first major freight railroad to release first-quarter earnings. Union Pacific Corp. will release its first-quarter results on Thursday, and Norfolk Southern Corp. will follow next Tuesday.

Here's how some railroad stocks were trading Wednesday:

— CSX, down 67 cents, or 3 percent, to $23.47.

— Norfolk Southern Corp., down $2.06, or 3 percent, to $73.81.

— Canadian Pacific Railway Ltd., down $2.99, or 2 percent, to $118.34.

— Genesee & Wyoming Inc., down $1.88, or 2 percent, to $80.62.

— Canadian National Railway, down $2.14, or 2 percent, to $94.91.