NEW YORK: Results from two major US railroads next week are likely to attract more scrutiny than usual as investors look for signs of how deeply U.S. President Donald Trump's multi-front trade war is affecting freight companies and the wider economy.
Among those reporting as the second quarter earnings season kicks off next week are Union Pacific Corp on Thursday and Kansas City Southern on Friday, amid worries that new U.S. import tariffs threatened by the Trump administration could also herald weakening demand for goods movers, including truckers, container companies and package carriers.
There is even talk of a "freight recession" and investors look to the transportation sector as a barometer of U.S. economic health.
The S&P 500, which crossed the 3,000 mark for the first time this week, has seesawed between record highs and selloffs in recent months on increasing U.S.-China trade acrimony and concerns about a U.S. economic slowdown.
"If these companies come out with reports that confirm people's concerns about tariffs and inventory build-up, that won't be good for the market," said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana.
Omaha, Nebraska-based Union Pacific operates a 32,000-route-mile rail network that includes the Los Angeles/Long Beach complex, a port responsible for most of the U.S.-China cargo flow.
Tariffs have already affected the company's bottom line. In the first quarter, overall freight volume fell, hurt by a 7% reduction in grain carloads driven by reduced exports to China.
In June, CEO Lance Fritz (pic) told Reuters the trade war is "a significant threat" to Union Pacific's outlook.
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