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Top-line growth and system efficiency improvement are the two issues which railroad managements need to address in order for them to take pressure off margin and earnings growth for the industry in 1999. A slowing of the US economy will have an effect on this in 1999, as will industry consolidation, although most railroads are taking steps in the right direction. Risk-tolerant investors will find several of thes stocks to be suitable, but conserative investors should avoid the industry.

The division of Conrail between CSX Corp and Norfolk Southern Corp has been approved by the US Surface Transportation Board and is planned to close in late Aug 1998. However, labor agreement finalization and debt financing for the purchase will delay bottom-line results. Union Pacific Corp is forecast to post its 3rd consecutive quarterly loss due to its service problems. These stocks are best only long-term investors who can tolerate risk.

Consolidation in the railroad industry has been continuing in 1998, but many of the mergers have resulted in poorer safety and service records on the part of many of the new combinations. There has also been rail gridlock in the Western states, and some shippers have been hurt by this. These stocks have been volatile in the late 1990s' and only those investors who can tolerate risk over the long term should consider them.

Merger activity in the railroad industry is causing concern for safety, ontime delivery and capacity. These delays are affecting the US economy in a significant way. Each railroad stock offers unique investment properties and investors must review them carefully. Price stability and high dividends are the properties that conservative investors should look for when purchasing railroad stocks.

Consolidation has continued to be a major trend within the railroad industry during the 1990s, even with some of the short-term safety and congestion problems involved. Railroad privatization in Mexico is also expected to have an impact on US rail carriers, as well. Grain carload volume has increased in 1997, and will in the future, but auto and coal volume has been reduced. Several railroad stocks may be rewarding for risk-tolerant investors.

The consolidation within the railroad industry are coming to an end which makes the industry a good long term investment option. International expansion is also expected to have a beneficial effect upon the industry. Earnings will increase through 2000-2002. Mexico is privatizing its railroad system and the CSX/Norfolk Southern acquisition of Conrail is before the Surface Transportation Board.

Consolidation is continuing in the railroad industry with 14 proposed mergers in 1995 and 1996. This trend is likely to continue on a smaller scale in 1996 and 1997, with the aims of efficiency and market share gains. Freight volume for 1996 is rising, and intermodal loads will increase during the second half of 1996 with an improved economy and higher trucking rates. These stocks are expected to outperform the market in 1996 and 1997.

Railroad traffic is expected to rise through the remaining months of 1996 to make up for a mild drop in the first quarter, and the industry as a whole should perform above-average during the year. Potential investors should be aware of a flurry of consolidations, exemplified by the merger of Illinois Central and CCP Holdings Inc and Wisconsin Central's acquisition of Rail Express Systems. Most industry stocks also should appreciate out to 1999-2001.

Railroads are continuing to improve efficiency and gain market share through mergers and consolidations. International diversification is also being sought to improve revenues and earnings. Lower grain loadings in 1996 will affect railroad traffic, but the last six months of the year should see an improvement in intermodal loadings. These stocks are timely for 1996, and most have investment potential through the next three to five years.

Consolidation is rampant in the railroad industry in 1994 and 1995. Union Pacific Corp has merged with Chicago & Northwestern and Southern Pacific, Wisconsin Central has purchased Algoma Central, and the Santa Fe Pacific merger with Burlington Northern is closing. The merger attempts of Canadian Pacific and Illinois Central have failed. These stocks are well-ranked for timeliness and will have good returns through the 1990s.

Railroad freight loadings have decreased in the 2nd qtr of 1995 and this is expected to continue through the year. Weather patterns and the slowing economy will also have a negative impact on railroad earnings, along with lessening of agricultural and coal loadings. Even with current earnings railroads will outperform the market in 1995 and 1996, and increased efficiency will make railroad stocks a good value.

The railroad industry has undergone many mergers during 1994, and most firms report strong demand for freight loading, which is expected to continue into 1995. Intermodal and coal loadings are especially strong, along with forest product and automobiles. Strong demand has required some firms to find different ways to meet their customer's needs. Investors should note that the industry is ranked highly in terms of investment timeliness.

The railroad industry is consolidating on evidence that shippers are avoiding the rails. Their complaint is that they must deal with more than one line, a situation that results in duplicative billing and delays. The two big deals pending involve Burlington Northern/Santa Fe Pacific and Illinois Central/Kansas City Southern. Strong loadings increases make rail stocks a good investment bet over a three- to five-year period.

Railroads should see an increase in traffic during the second half of 1994, following the heavy winter storms that closed down rail lines the preceding January and February. Coal shipments, in particular, should rise to make up for a 1993 miners' strike that depleted utility company coal reserves. The railroad industry also stands to benefit from Phase I of the Clean Air Act, which will lead to increases in the transport of low-sulfur coal and limestone.

Prospects for railroad industry stocks in 1994 differ by geographical region. Midwestern and Eastern lines could suffer at first from poor winter weather conditions but rebound throughout the rest of 1994. Conrail and Norfolk Southern could benefit from a forecasted increase in motor vehicle sales during 1995. Western railroads could see increased coal transportation business as many companies convert to low-sulfur coal use in compliance with the 1990 Clean Air Act. Prospects are good for this industry out to 1997-99.

Railroad industry stocks are timely yet have only average appreciation potential out to 1998-2000. This is despite the fact that grain loadings are predicted to increase substantially after lows during the first six months of 1994 resulting from low agricultural yields from flooded Midwestern states. By 1996-1988 many companies will likely increase their earnings by double digits. Investors should note that many so-called railroad companies may have no railroad holdings at all.

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