Rail baby. It’s hot. It’s making Warren Buffett look like a genius (not that he needed it).
In his latest note, Mike O’Rourke of BTIG rounds up some comments from rail executives.
CSX CFO Oscar Munoz summed up their business as follows, “So quickly, the summary, about 90% of our market we feel really, really good about. The housing area is probably the area that’s a little stable – a little unstable, and we’re working through that, but by and large, a good portion of our business continues.”
Norfolk Southern CEO “Wick” Moorman made these comments, “So for the balance of the year, as I say, I think most of our markets we continue to see relatively strong carloadings and we don’t see anything that changes that. If you look at the quarter story, on a sequential basis, we have seen sequential volume growth ever since the third quarter of 2009, which is just a complete anomaly in terms of the seasonal traffic patterns that we see on the railroad and we actually think, right now, the trends are such that we expect to see some sequential volume growth in the third quarter of this year. While the recovery progresses, our line is that recovery may be choppy and uneven and that may be an understatement, but it is a recovery. And we don’t expect anything that looks like the much discussed double dip or much discussed by some people anyway.“
Kansas City Southern CFO Michael Upchurch had this to say on the subject, “We were actually above August 2008 levels, so before the recession hit, and August of 2010 was the second best month in the last three years for our business. So we have clearly bounced back and expect to have a pretty positive back half of the year,” and “… we expect revenue growth to be approximately 20% in the back half of the year. That’s coming off a fairly good back half of 2009, so not the easiest comps. So still, tremendous growth for us in the back half of the year.“
And even beyond the CEO comments, the underlying industry data continues to be strong.
PragCap made this volumes chart last week:
Photo: The Pragmatic Capitalist
For more on this, see Todd Sullivan, who has been arguing that rail is consistent with the strong ISM report, and evidence the comeback is real.
Meanwhile stocks like Norfolk Southern (NSC) and Canadian National Railway (CNI) are near 52-week highs, and you can assume Buffett’s Burlington Northern would be, if it were still independent.
Update: And here’s more. Indeed notes that of all the industries in tracks, Transport has seen the biggest surge in new job listings.