A transportation analyst with J.P. Morgan Chase, Jill Evans follows weekly railcar loadings. Lately, she likes what she sees. "Metal shipments were up by double digits in the past three weeks," she says, "That hasn't happened in years."
Evans suggests this uptick in activity bodes well for railroads, as increased shipments will dovetail nicely with the railroads' efforts to improve pricing. The rails will also benefit, says Evans, from the productivity gains resulting from the heavy merger activity of the late '90s.
Better still, costs related to those mergers, such as spending on new terminals and connecting lines, have eased off. "The huge swing from negative to positive cash flow is coming back to the shareholders in the form of debt reduction and share buyback programs," Evans explains.
Signs of an economic rebound have kept investors interested in rail companies since last summer. Over the past 12 months, railroad stocks in the S&P 500 have gained 2%, versus a drop of 25% for the overall index.
Full story at Forbes.com