
Since each person in the U.S. requires the movement of approximately 40 tons of freight every year, many of the goods people use daily are either wholly shipped or contain components shipped by rail. Of the freight shipped by rail, 91 percent are bulk commodities, such as agriculture and energy products, automobiles and components, construction materials, chemicals, coal, equipment, food, metals, minerals, and paper and pulp. The remaining 9 percent is intermodal traffic.
The reason so much freight is shipped by rail is because rail is the most efficient and cost effective system of moving heavy freight over long distances. However, freight can only be moved by railroads along the current infrastructure in place today. As a result, the majority of freight moved around the country tends to move by rail from ports, manufacturing hubs, and areas of specific economic activity, such as rural areas for agriculture and energy products, to population centers or outlying regions where power plants and large manufacturing facilities are located. This hasn't changed in more than 100 years and isn't expected to change in the years ahead.
Below are three of the largest railroads based in the United States. As important as railroads are to the US economy, I expect to start a position in one or two of the companies below. Since the Union Pacific Railroad has operations primarily in the western half of the United States while CSX Railroad and Norfolk Southern Railroad operate mostly in the eastern half of the United States, that may influence my selection of railroads to invest in.
5 April 2015 Price $107.13 1yr Target $130.19 Analysts 27 1yr Cap Gain 21.53% Dividend $2.20 Yield 2.05% 1yr Est Tot Return 23.58% 3yr DivGR 13.33% 5yr DivGR 21.16% P/E 18.63 PEG 1.36 | Market Cap $94.41 Bil Beta 0.95 EPS (ttm) $5.75 Payout Ratio 38.26% EPS next yr $7.44 Forward P/E 14.39 Debt/Equity 0.54 ROA 10.00% ROE 24.20% ROI 17.20% Sales $23.99 Bil Income $5.18 Bil Profit Margin 21.59% |
5 April 2015 Price $33.32 1yr Target $37.08 Analysts 24 1yr Cap Gain 11.28% Dividend $0.64 Yield 1.92% 1yr Est Tot Return 13.21% 3yr DivGR 12.01% 5yr DivGR 16.51% P/E 17.26 PEG 1.72 | Market Cap $33.04 Bil Beta 1.30 EPS (ttm) $1.93 Payout Ratio 33.16% EPS next yr $2.40 Forward P/E 13.88 Debt/Equity 0.87 ROA 7.20% ROE 21.20% ROI 11.90% Sales $12.67 Bil Income $1.93 Bil Profit Margin 15.23% |
5 April 2015 Price $104.13 1yr Target $114.43 Analysts 23 1yr Cap Gain 9.89% Dividend $2.36 Yield 2.27% 1yr Est Tot Return 12.16% 3yr DivGR 10.06% 5yr DivGR 10.29% P/E 16.25 PEG 1.56 | Market Cap $34.02 Bil Beta 1.12 EPS (ttm) $6.41 Payout Ratio 36.81% EPS next yr $7.56 Forward P/E 13.77 Debt/Equity 0.73 ROA 6.00% ROE 16.40% ROI 11.40% Sales $11.62 Bil Income $1.99 Bil Profit Margin 17.12% |