By Nick Carey and Allison Martell
CHICAGO/TORONTO (Reuters) - North American railroads are pinning their hopes for a second-half recovery on American shoppers as they prepare to release what analysts expect will be dreary second-quarter results.
No. 3 U.S. railroad CSX Corp
"This is going to be a lousy earnings season for the railroads," said independent railroad analyst Anthony Hatch. "But there are some bright spots out there and in my opinion this is the bottom of the trough."
Analysts point to shipments of goods meant for shoppers, which are rising as shipments of coal, oil and grain are on the decline.
U.S. consumer spending rose 0.9 percent in May, the largest increase in nearly six years. The major railroads benefited from a 3.9 percent second-quarter increase in motor vehicles and equipment, and shipments of shipping containers containing consumer goods were up 4.6 percent.
"The question is whether the economy will aid in the recovery of the railroads," said Ken Hoexter, an analyst at BofA Merrill Lynch Global Research, "or whether those areas of support start to soften as well."
A steep drop in demand for coal is hurting U.S. and Canadian freight railroads.
CSX has reported coal shipments fell 14.7 percent during the second quarter. Coal shipments fell 15.6 percent during the just-ended quarter across all the major North American railroads.
Shipments of grain and crude oil also have faltered, pushing overall freight traffic at the major railroads down 1.7 percent in the last quarter, compared to relatively strong year ago results. Shares in No. 1 U.S. railroad Union Pacific Corp
The same factors have led several analysts to predict that Canadian National Railway Co
(Editing by Joseph White and Chizu Nomiyama)
