NSC Norfolk Southern Corp

By Jessica Menton 

Shares of U.S. railroad operators were on the mend Thursday following a better-than-expected earnings report from Union Pacific, easing investor fears over a trade-related slump among freight rail giants -- for now.

Shares of Union Pacific climbed 4.7% Thursday, as the company reported profit growth in the second quarter despite shipping less cargo. That compared with a 0.1% dip in the broader S&P 500. The gains helped cut some of the company's recent losses after rival CSX Corp. raised concerns among investors over the health of the economy after cutting its annual outlook Tuesday, pummeling shares of other railroad operators earlier this week.

CSX's stock slipped 1.3% Thursday, after dropping 10% a day earlier -- its biggest one-day percentage loss since October 2008. Meanwhile, shares of Norfolk Southern Corp. rose 2% after sliding 7.5% Wednesday, their largest daily drop since September 2012.

Freight railroads have struggled in 2019 amid trade tensions and growing uncertainty over the health of the economy. Mixed reports from CSX and Norfolk Southern this week also sent conflicting signals to investors on the health of the industrial economy following recent upbeat economic data on employment and consumer spending.

"Weekly railroad volumes have been weak, and that's a real-time indicator of the economy," said David Vernon, vice president and senior analyst at Sanford C. Bernstein. "Transportation data has been weak, but there's been a bifurcation between the freight economy and the consumer economy."

Union Pacific still faces demand headwinds this year, though some analysts said that could be from factors specific to the railroad sector and not related to the broader economy. It faces tariff issues and weather-related problems such as flooding. The company forecast freight volumes would be down about 2% in the second half of the year following a 3% drop in the first half.

Write to Jessica Menton at Jessica.Menton@wsj.com

(END) Dow Jones Newswires

July 18, 2019 14:06 ET (18:06 GMT)

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