INSIDE TALK - LARRY KAUFMAN WALL STREET YAWNS AS PREDICTABILITY ENVELOPS RAILROADS

INSIDE TALK - LARRY KAUFMAN WALL STREET YAWNS AS PREDICTABILITY ENVELOPS RAILROADS

A funny thing happened to the railroads on their way to prosperity. Wall Street lost interest.

Questioning at a couple of the meetings last week between railroad executives and securities analysts bordered on the desultory.I asked a couple of analysts why the sharp-edged questions for management seemed milder than usual. The reason apparently lies in the nature of Wall Street rather than the railroads.

It seems that railroads have reached the point where they are pretty much doing what is expected of them. And that doesn't turn the investment world on.

The last few years, as carriers have wrung costs out of their systems and ratcheted earnings to higher levels, the analysts were able to recommend railroads as a turnaround story.

The usual discount of railroad stock prices to the major market indexes was being reduced and as earnings increased, railroad stocks rose even faster.

Analysts advise the sales forces at the brokerages where they are employed. Their work is marketed particularly to large institutional investors that buy stock in huge chunks. Owning railroad stocks has enabled many a mutual fund or pension fund manager to look good over the last year or two by turning in performance that beat the averages.

Now, however, railroads have finished the really big cuts that bring impressive per-share profit increases. In the third quarter, despite the effect of last summer's flooding on a number of carriers and the requirement that all the roads take one-time, non-cash charges for restating their deferred tax accounts at increased tax rates, major railroads have performed about where analysts expected.

And, doing what's expected just doesn't cut it in the current mood on Wall Street.

Stock prices are relatively high and money continues to pour into stocks as low interest rates make fixed-income securities less attractive. A company needs a "story" if it is to attract attention - and stock buyers.

Actually, the lack of enthusiasm is positive. For too many years, railroads were a drag on Wall Street because they were viewed as laggards that couldn't earn money as effectively as other industries. That's no longer true.

'I'M SORRY, BUT I HAVE OTHER PLANS'

The Railway Progress Institute's annual black-tie dinner meeting long has been a love-in between the railroad supply industry and its customers.

The RPI, which meets in Washington on Nov. 11 this year, holds an all-day meeting at which supplier company executives hear about industry issues from government officials and industry leaders.

Chief executives of major railroads traditionally are seated around a huge oval table near the front of the banquet room. Executives of companies that manufacture everything from rail and bearings to locomotives and lubricants honor their customers.

Attendance usually exceeds 1,000 as suppliers vie with each other land key customers as guests at their tables. The meeting is mercifully short on speeches, although some of the entertainment has been unmercifully long.

The railway chiefs will be conspicuous by their absence this year.

A meeting of the board of directors of the Association of American Railroads has been scheduled the same day in Mexico City. The chief executives of all the major railroads are AAR directors.

Both events have been scheduled for a long time. Both organizations usually are in close communication.

An AAR spokesman would say only that the board had wanted to meet in Mexico - one of the industry's rapidly growing markets - for a long time and Nov. 11 apparently was the date the chiefs could all convene south of the border.

(That figures: if they weren't going to be in Mexico, they most probably would be in Washington that night.)

The RPI obviously is not happy, but sees it as a scheduling conflict rather than a slight.