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I copied this from the newsletter in my online brokerage.

DJ Wall Street Loves Railroad Stocks. Could Tariffs Stop Them in Their Tracks? -- Barrons.com


By Paul R. La Monica

President Donald Trump's threats to impose tariffs on Canada and Mexico could be a big problem for U.S. railroad operators that do a lot of business with America's neighbors.

But so far this year, investors are shrugging it off: They're all aboard when it comes to railroad stocks.

Shares of Union Pacific, Norfolk Southern, and Canadian Pacific Kansas City are all up more than 10% this year despite worries about tariffs. (Canadian Pacific Kansas City is based in Calgary but bought U.S. railroad Kansas City Southern in 2023.)

CSX, up just 2%, is the laggard in the industry. And Warren Buffett's Berkshire Hathaway, which owns the BNSF Railway, is up 4%, too, but the Oracle of Omaha's conglomerate is obviously much more than a transportation company.

Tariffs could slow the flow of goods being transported to the U.S. from Canada and Mexico, leading to a reduction in volume and lower revenue and profits for railroad operators.

Are investors being overly dismissive of concerns about a Trump trade tiff with Mexico and Canada? Perhaps.

But Union Pacific CEO Jim Vena said in the company's fourth quarter earnings conference call with analysts this month that he wasn't too worried about all the tariff talk. His take was that other potential policies from Trump and Congress -- such as deregulation and lower taxes -- would be good for the company and economy.

"I look at the entire package. If we get tariffs, but we also get the regulatory changes and we get the tax changes that were talked about by the president, with how depreciation is going to work on capital and how our corporate tax rate works, that could be...positive," Vena said.

"I'm hoping that it's a negotiating position by the president," since U.S. consumers would be hurt by any increase in prices, he added.

Canadian Pacific Kansas City Southern, which potentially has even more to lose if Trump imposes higher tariffs on Canada, didn't seem too nervous either. After all, the company (and industry for that matter) has seen this before with Trump's tariffs during his first term. Trump imposed tariffs on steel and aluminum from Canada and Mexico in 2018.

"Frankly, if you look back to 2018 and 2019 during the last set of tariffs, I think the reality was that these supply chains are very complex," said Canadian Pacific Kansas City chief marketing officer John Brooks during a conference call with analyst this week following its earnings.

"It's commodity-by-commodity, it's lane-by-lane, it's customer-by-customer," Brooks added. "What we saw is there wasn't a lot of change. It's hard to change these complexities overnight."

Wall Street doesn't seem overly concerned either. In fact, any tariff-related selloffs could mean a good bargain for investors.

"We still expect a relatively muted outcome when the dust ultimately settles between the U.S., Canada and Mexico and as a result would use any near-term volatility as a potential buying opportunity," said J.P. Morgan analyst Brian Ossenbeck in a report about Canadian Pacific Kansas City this week.

Daniel Imbro, an analyst with Stephens, added in an email to Barron's that he isn't too concerned about tariffs on Canada and Mexico because "we don't think these would make a lot of sense."

Imbro pointed out that many automotive supplies are transported from Mexico via train that "cannot be made here in the U.S., and [are] critical for domestic manufacturing jobs." Imbro added that oil and grain tend to be the biggest imports from Canada and that there isn't enough domestic production of those commodities to meet demand.

"We still think these goods would need to move by rail," he explained.

The four major railroads don't look particularly expensive either, trading in a range of 16 to 21 times earnings estimates for 2025. What's more, this quartet of stocks are all valued slightly below their 5-year average forward price-to-earnings ratios.

Analysts are also forecasting that earnings growth for the next few years for CSX, Canadian Pacific Kansas City, Norfolk Southern, and Union Pacific will grow about 8% to 12% annually over the next few years.

This combination of reasonable prices and steady momentum should provide a solid foundation for the industry.

So while investors should be aware that tariff headlines may cause some volatility and potential pullbacks for these stocks in the short-term, the railroads likely can keep chugging along.

Write to Paul R. La Monica at paul.lamonica@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.


(END) Dow Jones Newswires

January 30, 2025 13:47 ET (18:47 GMT)
Copyright (c) 2025 Dow Jones & Company, Inc.

I think that some people have not yet internalized "The Art of the Deal".

I think that some people have not yet internalized "The Art of the Deal".

For those that haven't internalized the "The Art of the Deal", what comes next??

Aussi

Trump's forte is negotiating.

Note how these tariffs were introduced. The 3 countries got tariffs placed on them UNLESS they take steps to reduce drug smuggling across the border.
What is said about Trump is "take him seriously not literally."

Canada said, Nah, we'd rather punch ourselves in the face.

Interesting times ahead.

Trump's forte is negotiating.

See?

Fastest. Trade war. Ever.

"Canada Will Send 10,000 Troops To Border, Name Fentanyl Czar To Delay Trump Tariffs" MON FEB 3, AT 3:53 PM

"Mexico agrees to deploy 10,000 troops to US border in exchange for tariff pause" February 3, 2025 10:58am EST

Tariffs on both countries' "paused" for 30 days.

Announced on Saturday for going into effect Tuesday, they caved on Monday.

Two days of *types* *deletes* *types* *deletes* *oh heck* hair on fire people emoting on first level issues, never bothering to look past step 1. Heck, even CHECKERS players know to look further than the next move.


I must admit, they caved even faster than I thought they would.

Mexico and Canada just promised things that they are already doing.

But heck, you do you.

See?

Fastest. Trade war. Ever.

You’re speaking to people who will double down on lying and ignorance until the end of time! Good luck 👍

"Trump's forte is negotiating."

You really need to get better sources of information. The ones you are using are really taking advantage of your lack of knowledge.

I am so glad that you think Trump is a good negotiator because he got Mexico and Canada to do things that they were already doing.

Heck, even CHECKERS players know to look further than the next move.

I suppose sometimes the difference in views comes in how many steps and years you look down the line. The US has decided to act like a bully by using its size force partners and long standing friends to do what it wants them to do. It isn’t afraid to humiliate them if they can or berate them into doing what they want. Reminds me of the behavior of the head of a school gang that wants to assert dominance.

If the next step you are referring to is that the use of tariffs as a threat with longstanding trading partners is capable of getting them to do things you want as a first effect, you can certainly see that happening right now. But what’s the next order implication after that?

If you thought the US was no longer a friend but was instead turning into a bully, who is now insulting you, withholding aid, and becoming unreliable and unpredictable, what would you do? You might seek other friends with whom you try to strike mutually beneficial trade deals that don’t include the US, you might look to improve your relationships with others whom you previously shunned because they weren’t as aligned with your values as the US, and you might might resent the US to work against their interests out of personal pride or animosity.

You won’t see those things as quickly and the next order impacts can span decades. The US achieved privileged status in international trade not just because of its strength but because it allowed other countries to flourish under the canopy of its hegemonic military protection and willingness to be a reliable, open market for countries trying to recover from WW2. There is no lead for things to always be that way but belligerent bully wasn’t anything that anyone in the field of international political economy was expecting or recommending. What is remarkable is how quickly it’s already starting. Columbia has already increased diplomacy with China. The EU has already started striking bilateral and multilateral trade agreements that aren’t anchored by IS participation. Mexico and Canada are trying to figure if they should ally to be a counter to a solo US in negotiations. The US is so powerful that many of these things won’t work, but it’s remarkable how quickly allies are trying to figure out how to counter the US if necessary.

Create an shock and awe issue and watch the media go drama big time to sell ads
Make bold absolute conditions that are trivial
Pretend there is a change
Parade as a fixer
The cult stands and claps in unison
Other half rolls their eyes

I must admit, they caved even faster than I thought they would.

I'm sure that Canada's new actions (err, announcements) will make a truly meaningful difference on the 0.2% of opioids arriving in the US via the Canadian border rather than from further south : )

The bigger threat, for many years, has been the risk of Canadians taking over the US comedian industry.

Jim

I'm sure that Canada's new actions (err, announcements) ...

We will see in 30 days if it was merely an announcement. The internet tells me that politicians sometimes say they are going to do a thing and never get around to actually doing it.



... will make a truly meaningful difference on the 0.2% of opioids arriving in the US via the Canadian border rather than from further south : )

I am not sure how anybody could know how much comes across each border. As far as I know, cartels don't fill out customs declarations.


The bigger threat, for many years, has been the risk of Canadians taking over the US comedian industry.

There are US comedians? You learn something new every day.

... will make a truly meaningful difference on the 0.2% of opioids arriving in the US via the Canadian border rather than from further south : )
...
I am not sure how anybody could know how much comes across each border. As far as I know, cartels don't fill out customs declarations.

The usual assumption is that the illegal flows are roughly in proportion to the seizures. The 0.2% figure is from recent seizure ratios. i.e., about 500 times as much stuff seized in the US at the southern border as at the northern one. Nobody in any country believes that the proposed/pending tariffs on imports from Canada have anything whatsoever to do with drug flows. It does make the situation sound scary, which props up the notion that it's an emergency, which in turn props up the justification for doing it by decree.

Jim

" Nobody in any country believes that the proposed/pending tariffs on imports from Canada have anything whatsoever to do with drug flows. It does make the situation sound scary, which props up the notion that it's an emergency, which in turn props up the justification for doing it by decree."

WHAT? Rethink it bud, most of us who live here want the borders secure and the drug flow restricted as much as possible. For years the actual drug deaths have been , doctored, it much worse than advertised.

Hey HC,
How come you no longer (as of Jan. 20th) post stories about the terrible problem of retail theft in America?

PS Hope all is well with you and with your friends the dancing girls/ladies of the night, who do NOT accept intrinsic value! LOL

" Hey HC,
How come you no longer (as of Jan. 20th) post stories about the terrible problem of retail theft in America?"

Hi old pal, don't you ever get tired of embarrassing yourself? Do I have to share the reports that site continuing shrink problems at the dollar stores? The dollar stores really aren't on topic here and I wouldn't want to upset anyone, comprende amigo? BTW, what is my, IV net worth per 1000 Bs these days? Thanks pal.

"site"?

I don't think that word means what you think it means.

" Nobody in any country believes that the proposed/pending tariffs on imports from Canada have anything whatsoever to do with drug flows. It does make the situation sound scary, which props up the notion that it's an emergency, which in turn props up the justification for doing it by decree."
...
WHAT? Rethink it bud, most of us who live here want the borders secure and the drug flow restricted as much as possible.

That does not contradict what I said.
Sure, people want secure borders so illegal drug flows reduced, and good for them. But nobody serious thinks it's currently a material problem for the US coming from the Canadian border, because objectively it just isn't.

There are lots of gut feelings and posturings without any supporting basis in reality. I'm very much against widespread cannibalism, but I don't advocate crushing GDP to clamp down on it.

Jim

Sorry Jim old buddy, I dropped the ball with respect to trying to keep my old foreign friends informed. But as always, I'm here for you.

"LeDuff told NewsNation that, in the last four years, around 500 people on the terror watch list crossed into the U.S. from the Mexico border. Those crossing from Canada totaled nearly 1,000, he said.

“It’s not a good deal up there, man,” he said. “It’s wide open.”

Trump’s tariff delay is ‘opportunity’ for Mexico: Ex-DEA chief
LeDuff couldn’t speak to Canada’s fentanyl flow for certain, telling NewsNation that the border’s porosity lends itself to unclear numbers.

“As you saw today, Trudeau bent. When you’re throwing $1.5 billion for a fentanyl czar, you know something’s up,” he said."

https://www.newsnationnow.com/cuomo-show/us-canada...

"LeDuff told NewsNation that, in the last four years, around 500 people on the terror watch list crossed into the U.S. from the Mexico border. Those crossing from Canada totaled nearly 1,000, he said.

Umm, what does that have to do with drug smuggling, the subject under discussion?

Besides, most terrorists in the US are American born. Imports are (to date) pretty trivial in number by comparison. So there are probably better ways to focus the attention, for example having a well run and impartial FBI.

Canadians are plainly much more at risk from Americans than vice versa, on so so many fronts. Of course Canadians are far from unique in that regard, I suppose, so I shouldn't complain.

As I've posted a few times over the last few years, I've been gradually reducing my US exposure over time due to the jurisdiction risk. It's slow work, since it's usually a great place for amoral plutocrats like me to make wads of money.

Jim

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