Railroad Stocks, Hurt by Coal, to Make a Comeback

BOSTON (TheStreet) -- Some think the country's biggest railroads will become victims of the natural gas industry's success, as power plants replace coal as their fuel of choice, but they're still chugging along.

Coal has historically made up just over 20% of the biggest railroads' volume and as much as a third of their revenue. The reasoning is that railroads will get sidetracked by utilities' shift to the much cheaper natural gas, which is now selling for roughly half what it was a year ago.

That train, indeed, has left the station, as last week the Energy Information Administration reported that coal consumption by power generators fell 19% in the fourth quarter from the previous three months and 9.4% from a year earlier.

Certainly part of the decline is due to an unusually mild winter that contributed to a buildup of inventories of unburned coal to unprecedented levels, but utilities are relying on gas wherever they can and either building gas fired plants, converting their coal-burning ones to it, or at least thinking about it, which doesn't bode well for coal haulers.