22 October 2009

WSJ article about carloadings - Buffett

Here's an article ripped from the WSJ about railcarloadings, Warren B. the economy etc. We have the best online source of these data over at frs.transmatch.com, in case you want to see what Warren looks at every Thursday morning.

Union Pacific is among six Dow Jones Transportation Average companies reporting third-quarter results Thursday.
Associated Press

Union Pacific is among six Dow Jones Transportation Average companies reporting third-quarter results Thursday.

Six of the 20 companies in the Dow Jones Transportation Average report third-quarter results Thursday. They include railroads Union Pacific and Burlington Northern Santa Fe, package carrier United Parcel Service, service firms GATX and Ryder System, and the airline JetBlue. Delta Air Lines, not in the Dow transports, also reports.

What they say should offer hints about the broader economy's strength. The transports have gained 84% since March 9, outpacing the Dow Jones Industrial Average. According to a tenet of Dow Theory, transports leading industrials suggests the recovery in the economy and markets is real.

The idea, dating to Charles Dow's theorizing in the early pages of the Wall Street Journal, is that transports take what industrials make.

But the amount of stuff being made and moved is still low. Rail-car loadings, one of Warren Buffett's favorite indicators, have gotten less bad every month since May, but were still down 14% in September from a year ago, according to the Association of American Railroads.

In contrast, by the last month of the 2001 recession, rail-car loadings were already 2% higher than in 2000.

[dow jones and transporation stocks]

Earlier this week, another Dow transport, trucking and logistics company, C.H. Robinson Worldwide, reported revenue that missed Wall Street forecasts. In a familiar refrain, it topped earnings estimates by squeezing costs.

On Wednesday, two more Dow transports, Continental Airlines and American Airlines parent AMR, also reported forecast-beating results. But both reported 20% revenue declines from a year earlier. Their shares tumbled 14% and 12%, respectively, on Wednesday, helping drag the Dow transports down nearly 3%.

It didn't help that oil crossed $80 a barrel on Wednesday for the first time in a year.

Transports and oil have both thrived as risk appetite has returned. But they can only ride together for so long: Cheaper fuel helped transports overcome lousy third-quarter revenue. With crude up 19% from its third-quarter average of $68.24 a barrel, fuel might not be so cheap in the fourth quarter.

The rally in transports and the revival of transportation activity are clearly good news. But the road is twisty.

Write to Mark Gongloff at mark.gongloff@wsj.com

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