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February 26, 2007 1:00 PM, EST

Rail Freight Slowing in First Quarter, Analyst Says

UP Sets Layoffs, Faces Challenge to New Route
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Union Pacific Railroad has laid off 124 people and cut back hours for 455 more because of lower freight demand, the Associated Press reported, and a market analysis firm Monday lowered its market outlook for the rail sector.A UP spokeswoman said the layoffs were in regions of the country were the railroad relies on construction-related and automotive business, and said there may be further cutbacks, AP reported.Meanwhile, transportation analyst Ed Wolfe of Bear Stearns wrote in a note to clients that the firm was reducing its first-quarter earnings estimates.Through the first seven week of the year, total rail carloadings were down 4.4% for the large railroads, though some of that was due to bad weather, Wolfe wrote, as Bear Stearns lowered its rail rating to “market weight” from “market overweight.”Separately, growers in Arizona were concerned about a proposed new UP rail line from the western United States to Mexico, AP reported.A proposed new Mexican seaport could provide the railroad with a major business opportunity, but southwestern Arizona farmers were concerned the route could run through their land.UP said its plans were still under development but that it has started acquiring options to buy property for a 200-mile U.S. spur that container trains could travel between the rail line’s east-west “Sunset Route” and the proposed seaport, AP reported.