Despite some positive signs that the economy is on the mend, it could be years before Canadian railways fully recover from the recession, the Financial Post reported.
Rail shipments are an important bellwether for the broader economy because they are so closely linked to global trade. As the economy begins to show signs of life, so too have the volumes of North American top-tier rails heading their into this earnings season.
In recent weeks, year-over-year volume declines have eased from the single- digit to the mid-teen range from the 20 percent - or greater - declines experienced earlier this year. "The industry is poised to enjoy a healthy tailwind alongside a gradual improvement in the North American and global economies," Steve Hansen, Raymond James analyst, said in a recent note.
Carloads at Canadian railways have steadily improved 15 percent since their lows in May on the back of a strong harvest, the US "cash for clunkers" program, and a recent restocking, according to Jacob Bout, CIBC World Markets analyst. Intermodal volumes, typically used for shipping retail goods, also hit their 2009 peak level last week, he added.
Still, despite this positive momentum, carloads at Canadian National Railway were down 11.9 percent last week year over year, and Canadian Pacific Railway's shipments fell 12.2 percent. While that is a sizable improvement over the declines experienced in the second quarter, it points to an underlying weakness in the economy, and suggests that the volumes will slowly begin to return in 2010 and into 2011.
"The economic recovery may be a gradual one versus a V-shaped recovery," he said in a recent note to clients, Bout said. |
