Analyst Sees Little Q2 Volume Gains For Rail Sector

Major rail carriers' may not see much volume improvement in the current quarter following a winter of disappointing volume and poor share performance, an analyst said Wednesday. But the analyst, Susquehanna's Bascombe Majors, said investors may be well-advised to buy shares of at least three companies in the sector on resulting stock-price weakness. Majors reiterated Positive ratings on CSX Corp.

Norfolk Southern Corp.

and Union Pacific Corp.

. The slow start to 2015 is "discounted in the shares," according to Majors, who said stock prices should be stable while sentiment is weaker than warranted by the companies' outlook. CSX and Union Pacific are each off more than 9 percent in the year to date, with Norfolk down about 8 percent. CSX on Wednesday cut its 2015 earnings growth forecast to the mid-to high single-digits from double-digit gains. On Tuesday the company posted first-quarter earnings growth of 11 percent on lower-than expected volume. Union Pacific is slated to post quarterly results April 23 with Norfolk following on April 29. "The second quarter will be challenging," Majors said, noting continued weak demand from the energy sector and difficult comparisons with last year's "catch-up" from a difficult winter. On the plus side for rail companies: lower customer fuel surcharges coupled with reasonably strong demand may offer opportunities for rate hikes. Although Majors is bullish on the three railroad concerns, he maintained Neutral ratings on four other companies in the sector. Stuck in Neutral in Major's book are Genesee & Wyoming Inc.

, Kansas City Southern

, Canadian Pacific Railway Ltd.

and Canadian National Railway

.