NEW YORK, NY-- - Railroad stocks have surged recently as a number of railroad companies have reported strong earnings growth despite experiencing a steep drop in coal shipments. The iShares Dow Jones Transportation Average ETF (IYT) has gained over 10 percent year-to-date, while the Standard and Poor's 500 Railroads Index (S5RAIL) is up roughly 9 percent year-to-date. Five Star Equities examines the outlook for companies in the Railroads Industry and provides equity research on Norfolk Southern Corp. (NYSE: NSC) and Union Pacific Corporation (NYSE: UNP).

Kansas City Southern, CSX and Norfolk Southern have all reported profits in the fourth quarter that were better-than-expected. A major decline for domestic coal became a major concern for the Railroads Industry in 2012 as railways account for approximately two-thirds of all U.S. coal shipments. Recoveries in the U.S. housing and automotive markets have played a major part in offsetting costs related to sharp drops in coal shipments. According to the Association of American Railroads shipments of lumber and motor vehicles saw increases of 13 percent and 16.5 percent, respectively, in 2012.

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Norfolk Southern's Norfolk Southern Railway subsidiary operates approximately 20,000 route miles in 22 states and the District of Columbia, serves every major container port in the eastern United States, and provides efficient connections to other rail carriers. The company also recently announced plans to spend $2 billion in 2013 for capital improvements to its rail transportation network. Shares of Norfolk have gained over 13 percent year-to-date.

Union Pacific Railroad links 23 states in the western two-thirds of the country by rail, providing a critical link in the global supply chain. From 2007-2012, Union Pacific invested $18 billion in its network and operations to support America's transportation infrastructure, including a record $3.7 billion in 2012. The company reported a net income $1 billion for the fourth quarter of 2012, compared to a net income of $964 million a year ago.

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