Moody's cuts rail industry outlook to 'negative'

Moody's Investors Service has downgraded its outlook for the North American rail industry to "negative" from "stable," as railroads face deep and long-lasting declines in freight volumes, the firm announced yesterday.

The weak industry conditions will likely continue through at least the third quarter, according to a Moody's press release.

"Volumes of coal, the second-largest freight group in the North American railroad industry, plunged by an unprecedented 37 percent in April amid persistently low natural gas prices and high stockpiles at utilities after a warm winter," said Vice President and Senior Analyst Rene Lipsch.

Revenue growth is anticipated to fall below zero, the firm's minimum for a stable outlook, she added.

Moody's projects total freight volume to decline 3.5 percent to 4.5 percent this year, driven in particular by an expected 20 percent to 25 percent decline in coal shipments.