Rail Traffic Jam Could Take Months to Clear, Hurt Earnings

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By Trey Thoelcke Published

Railroad Oil Tank Cars

Recent bad weather, a surge in crude shipments and a record grain crop have combined to create a jam in cargo delivered by rail. Train speeds have dropped around 9% in past few months, and the time loaded cars wait in terminals rose 13%.

Carloads of petroleum and related products surged 31% last year, according to the Association of American Railroads, due largely to the shale drilling boom. And U.S. railroads hauled 13% more grain carloads in the first nine weeks of the year.

BNSF Railway, owned by Warren Buffett’s Berkshire Hathaway Inc. (NYSE: BRK-A), is among those rail companies adding more locomotives to help ease the traffic jam. The number of BNSF engines has increased by 250 in the past two months, and the company is looking to roll out another 125 in the coming two months.

Union Pacific Corp. (NYSE: UNP) is the largest U.S. railroad, as measured by total operating revenue, and it has taken up to 250 locomotives out of storage this year. Peer Norfolk Southern Corp. (NYSE: NSC) has deployed more than 100.

It could take a couple of months for railroads to work out the traffic knot and return to normal speeds, suggested James Squires, president of Norfolk Southern. The problem is especially acute in the Midwest, particularly around Chicago.

Delays also are likely to bite into the earnings of the rail carriers. Union Pacific has already warned that weather-related delays will hurt its earnings by as much as $0.04 per share, and CSX Corp. (NYSE: CSX) said Wednesday that its first-quarter earnings could take a hit of about about $0.10 per share.

Photo of Trey Thoelcke
About the Author Trey Thoelcke →

Trey has been an editor and author at 24/7 Wall St. for more than a decade, where he has published thousands of articles analyzing corporate earnings, dividend stocks, short interest, insider buying, private equity, and market trends. His comprehensive coverage spans the full spectrum of financial markets, from blue-chip stalwarts to emerging growth companies.

Beyond 24/7 Wall St., Trey has created and edited financial content for Benzinga and AOL's BloggingStocks, contributing additional hundreds of articles to the investment community. He previously oversaw the 24/7 Climate Insights site, managing editorial operations and content strategy, and currently oversees and creates content for My Investing News.

Trey's editorial expertise extends across multiple publishing environments. He served as production editor at Dearborn Financial Publishing and development editor at Kaplan, where he helped shape financial education materials. Earlier in his career, he worked as a writer-producer at SVE. His freelance editing portfolio includes work for prestigious clients such as Sage Publications, Rand McNally, the Institute for Supply Management, the American Library Association, Eggplant Literary Productions, and Spiegel.

Outside of financial journalism, Trey writes fiction and has been an active member of the writing community for years, overseeing a long-running critique group and moderating workshop sessions at regional conventions. He lives with his family in an old house in the Midwest.

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