Floods seen hitting transport company results
NEW YORK (Reuters) - The worst flooding in the U.S. Midwest in 15 years is expected to reduce second-quarter earnings at railroads, barge companies and trucking firms, but the full extent of the damage may not be clear for weeks.
Flooding has damaged unknown miles of railroad track and bridges. The magnitude of the damage to infrastructure will not be known until flood waters recede, and may require expensive repairs or replacement of track and signals.
Railroad Union Pacific Corp said on Tuesday floods would reduce second-quarter earnings by about 5 cents per share to the bottom half of its forecast of 90 cents to 98 cents per share, below Wall Street target of 96 cents.
Spokesman Mark Davis said Union Pacific, the No. 1 U.S. railroad, has reopened its North-South line and could resume limited East-West service on Wednesday.
Shares of railroads CSX Corp, Burlington Northern Santa Fe Corp (BNSF) and Norfolk Southern Corpall closed down more than 2.5 percent on the New York Stock Exchange. Union Pacific fell 4.7 percent.
"We expect the flooding that hit the Midwest to impact most transportation companies by a couple pennies (per share), mainly because of the increased costs associated with rerouted traffic," said Lee Klaskow, senior transportation and logistics analyst at Longbow Research in New York.
HISTORIC FLOODING
Nearly 300 miles of the Mississippi River are closed to commercial traffic, disrupting shipments of grain, coal and petroleum products as well as transcontinental shipments of goods from West Coast ports.
Some sections will reopen Wednesday, but the entire river will not reopen for at least two weeks. For more, see
Rail traffic has slowed across Iowa and at interchange points between Chicago and Memphis, Morgan Stanley analyst William Green said in a research note.
"An unprecedented run in fuel prices and a slowing economy were already limiting rails' second-quarter earnings growth, but historic flooding in the Midwest should only add to the near-term troubles," Green wrote.
"While most effects will be temporary, we worry that damage to the corn crop and track signaling may have longer-term implications for the second half."
Damage to Midwest corn and soybean crops could reduce export shipments, he added.
Green said Union Pacific was hit hardest, followed by BNSF and Canadian National Railway Co.
Union Pacific and Norfolk Southern have enacted force majeure -- a contract clause citing an unexpected event that removes contract liability -- because of flooding, allowing extended deadlines for cargo delivery. Continued...
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