NEW YORK (TheStreet) -- The transport sector is up slightly on Tuesday, but that's not a good enough reason to be bullish on railroad stocks, according to TheStreet's Jim Cramer, the co-portfolio manager of the Action Alerts PLUS portfolio.
On CNBC's "Mad Dash" segment, Cramer pointed out analysts at Citigroup said there's risk that Union Pacific (UNP) - Get Report and Norfolk Southern (NSC) - Get Report could pre-announce worse-than-expected earnings results.
Why? According to Cramer, pipeline companies continue to expand their transportation of oil and natural gas, which means fewer shipments for railroad companies. That's why "the rails have been so terrible."
Oil and natural gas production has also reduced the need for coal in many areas, which is a big blow to companies like CSX Corp. (CSX) - Get Report and Norfolk Southern, which are big coal shippers, Cramer explained. That volume drop can't be replaced by shipments of agricultural products or timber, he added.
"I want people to be very careful" with rail stocks, Cramer concluded.
At the time of publication, Cramer's Action Alerts PLUS had no position in companies mentioned.