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Sector Wrap: Freight railroads recover some ground

NEW YORK (AP) -- Shares of freight railroads rose Monday, regaining some of the losses they suffered last week amid signs of soft demand for hauling coal.

An analyst for Citi lowered his estimates for railroad earnings this year, but mainly left 2013 forecasts unchanged, saying that softness in shipping demand was likely to be temporary.

Norfolk Southern said last week that lower coal shipments and a decline in fuel surcharges would cause it to earn less than analysts expected in the third quarter. The warning sent Norfolk's shares down 9 percent in one day and raised concern about other railroads.

Railroads are seeing their coal-shipping business decline as utilities shift from burning coal to cheaper natural gas.

Citi analyst Christian Wetherbee said in a note to clients Monday that he was reducing estimates for 2012 earnings for several railroad operators by an average of 6 percent. But Wetherbee took a glass-half-full approach to the longer term, leaving 2013 profit forecasts unchanged other than an earlier reduction for Norfolk Southern.

Wetherbee said that Norfolk's scare was mostly limited to volatility in that company's fuel surcharges and softness in demand for coal that is exported and used in steel making.

The analyst said railroads overall were "still on track" because of exposure to better areas of a weak economy, including autos. After the recent drop in railroad stock prices, Wetherbee said, they were a good value.

Shares of Union Pacific Corp. rose $1.70, to end Monday trading at $121.07. Norfolk Southern Corp. gained $1.29, or 2 percent, to $66.29; CSX Corp. picked up 23 cents, to $21.36; and Canadian National Railway Co. added $1.29, to end at $89.36.