NEW YORK - The news has been awful for freight carriers.
"Our surveys show there's been no moderation in the decline in demand for freight or trucking activity," says Jason Trennert, managing director and economist at International Strategy and Investment, a New York-based brokerage firm specializing in economic research. Though the S&P transportation industry index has made a bit of a recovery, it is still off 7% from its high in early February.
While hardly bullish, ISI's Trennert acknowledges that trucking companies and freight stocks tend to be "early cycle performers." Jill Evans, senior transportation analyst at J.P. Morgan Chase, also sees hope for an early rebound. "Historically, these stocks have had a high correlation to movements by the Fed," she says, adding that the Federal Reserve's recent lowering of short-term rates has been "fairly aggressive relative to historical measures."
According to Evans, rail companies in particular have advantages in the current economic climate because of their coal-shipping business. Of the U.S. rails she covers, Evans recommends Omaha-based Union Pacific (nyse: UNP - news - people), whose tracks cover 23 states in the Midwest and western United States. In 2000, energy-related freight represented one-fifth of the Union Pacific Railroad's revenue. The company also owns Overnite Transportation, a less-than-truckload carrier.
Full story at Forbes.com