According to a Cowen and Co. second-quarter railroad survey, over the next six to 12 months railroad shippers anticipate an average base rate increase of 3.5 percent.
This result is a 0.3-percent decrease in expectations from the first-quarter survey.
“We believe the slight drop is partly attributable to tempered expectations by coal shippers, who represented a minority of our survey participants, but provided especially negative feedback on pricing outlook,” Cowen wrote in an update explaining the survey. “Additionally, the lack of pricing power for truck competitive business may have also weighed on the results.”
While price expectations are down, shippers expect their businesses to expand by 4.4 percent in the next year. This represents a 0.4-percent increase from the last two surveys, which were seen as a low point of shippers’ outlook. Business in the consumer product, chemical, forest product and transportation industries have improved from the last quarter; metals, building and agricultural products have declined.
“The second quarter survey results represent a continuation of the modestly improved outlook seen in our 1Q13 and 4Q12 surveys. The notable uptick in confidence, higher business growth expectations, and largely stable employment outlook are all positive indications for rail,” Cowen wrote. “That said, the slight downtick in price expectations bears monitoring by investors.” - Jon Ross