Railroad shipments of lumber are gaining momentum, signaling a construction upturn that should drive up shipping volume of consumer products from appliances to furniture.
This mounting demand for construction and household goods bodes well for Union Pacific Corp., CSX Corp., Norfolk Southern Corp. and Kansas City Southern as they report earnings for a quarter that was crimped by a deep drop in coal shipments.
Auto and intermodal shipping, the movement of goods in containers that can be shifted between modes of transportation such as from train to truck, have more than offset the coal drop triggered by a mild winter and low natural gas prices.
“The implication of stronger lumber shipments is that if homes are getting built then homes are being furnished,” said Jeffrey Kauffman, senior research analyst at Sterne Agee in New York. “That is going to drive intermodal volume – furniture, PVC piping, and also auto sales can be related to new homes.”
For the first half of this year, U.S. railroads hauled 11.8% more carloads of lumber and wood products than the same period a year earlier, the American Association of Railroads (AAR) said.