Despite a Lousy Second Quarter, Railroad Stocks Could Be Poised for a Rebound
Given this past week's quarterly results from North America's railroad companies, it would be easy to presume the worst. Union Pacific (NYSE: UNP) reported a 24% decline in freight revenue. CSX (NASDAQ: CSX) saw operating income slide 37% lower year over year. Canadian Pacific Railway (NYSE: CP) seemed to fare slightly better, topping earnings estimates of 3.77 Canadian dollars per share for its second quarter. It was a dubious victory though. The bottom line of CA$4.07 per share was down from earnings of CA$4.30 for the same quarter a year earlier, while the top line fell 9%.
In short, the superficial picture is grim. Shares of each of these three railroad stocks suffered following their respective quarterly reports, unwinding a small part of the rebound each of these stocks made after hitting a major low in April.
As it turns out, however, those who have bought these names since April's bottom have the right idea. While last quarter's results were indeed ugly, the timing of each of these quarters was incredibly unlucky. The rail business has improved dramatically since these quarters ended.
Source Fool.com
