According to a recent report, Morgan Stanley analysts believe 2015 and 2016 could be big years for U.S. rail companies Union Pacific Corp UNP 3.44%, CSX Corp CSX 0.81%, and Norfolk Southern Corp NSC 3.54%.
Analysts see tight capacity, increasing truck pricing, and inflation as driving forces behind a projected doubling of rail core price growth in 2015.
Trucking Leads The Way
While analysts have no direct indicator of rail capacity utilization, analysts turn to trucking numbers as an indication of what to expect in rails. A recent survey of shippers reveals that industry insiders believe that trucking capacity is now above previous peak capacities reached in 2004 and 2006.
Analysts predict similar capacity tightening for the rail companies as well.
Pricing Power
Analysts believe that demand growth will outpace capacity growth for rails in 2015, and this environment will lead to increased pricing power. If trucking prices rise 4 to 5 percent, rail prices are expected to increase at least that much as well.
A large utility company recently told Morgan Stanley that one rail service provider is already asking for a 5 to 10 percent pricing increase in 2015.
Rising Margins
Morgan Stanley analyst William J. Greene makes a strong case for…
Read the rest of this article (and all my other articles) for free on Benzinga by clicking here
Want to learn more about the stock market? Or maybe you just want to be able to look sophisticated in front of your coworkers when they ask you what you are reading on your Kindle, and you’d prefer to tell them “Oh, I’m just reading a book about stock market analysis,” rather than the usual “Oh, I’m just looking at pics of my ex-girlfriend on Facebook.” For these reasons and more, check out my book, Beating Wall Street with Common Sense. I don’t have a degree in finance; I have a degree in neuroscience. You don’t have to predict what stocks will do if you can predict what traders will do and be one step ahead of them. I made a 400% return in the stock market over five years using only basic principles of psychology and common sense. Beating Wall Street with Common Sense is now available on Amazon, and tradingcommonsense.com is always available on your local internet!
