The world today can't exist without a robust transportation system. That system not only includes the basic infrastructure needed to move stuff around the country but the assets needed to move those items too. In its entirety its what makes the modern world "modern". And while the world has created several ways of moving those items necessary for making the world function, railroads are still the way most things move.
Click to Enlarge Today's freight is moved around the country every day by rail, water, pipeline, truck, and air, but the rail network accounts for approximately 40 percent of the freight by ton-miles. Railroads in general ship bulk freight (grain and coal) in rail cars and consumer goods (such as items found at the neighborhood store) in containers or trailers. The latter is often referred to as intermodal traffic because it refers to the transportation of freight across multiple modes of transportation to include rail, air, water, or trucks. Since 1980 intermodal traffic has become the fastest growing part of the freight rail industry.
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.
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.
Union Pacific Corp operates railroads within the United States. The company offers freight transportation services for agricultural products, including grains, commodities produced from grains, and food and beverage products; automotive products, such as finished vehicles and automotive parts; and chemicals consisting of industrial chemicals, plastics, crude oil, liquid petroleum gases, fertilizers, soda ash, sodium products, and phosphorus rock and sulfur products. It also provides transportation services for coal and petroleum coke; industrial products comprising construction products, minerals, consumer goods, metals, lumber, paper, and other miscellaneous products; and intermodal import and export containers and trailers. Its rail network includes 31,974 route miles linking the Pacific Coast and Gulf Coast ports with the Midwest and eastern United States gateways. Union Pacific Corporation was founded in 1862 and is headquartered in Omaha, Nebraska. (Summary) (Company) (Daily Chart)
| 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% |
CSX Corp provides rail-based transportation services in the United States and Canada. It offers traditional rail services, and transports intermodal containers and trailers. The company transports crushed stone, sand and gravel, metal, phosphate, fertilizer, food, consumer, agricultural, automotive, paper, and chemical products; and coal, coke, and iron ore to electricity-generating power plants, steel manufacturers, and industrial plants, as well as exports coal to deep-water port facilities. It also provides intermodal transportation services through a network of approximately 50 terminals transporting manufactured consumer goods in containers in the eastern United States, as well as performs drayage services, including pickup and delivery of intermodal shipments; and trucking dispatch services. In addition, the company serves the automotive industry with various distribution centers and storage locations; and connects non-rail served customers through transferring products from rail to trucks, such as plastics and ethanol. Further, it is involved in the acquisition, development, sale, lease, and management of real estate properties. The company operates approximately 21,000 route mile rail network, which serves various population centers in 23 states east of the Mississippi River, the District of Columbia, and the Canadian provinces of Ontario and Quebec, as well as owns and leases approximately 4,000 locomotives. It also serves production and distribution facilities through track connections. The company was founded in 1978 and is based in Jacksonville, Florida. (Summary) (Company) (Daily Chart)
| 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% |
Norfolk Southern Corp engages in the rail transportation of raw materials, intermediate products, and finished goods. As of December 31, 2014, it operated approximately 20,000 miles of road in 22 states and the District of Columbia. The company also operates scheduled passenger trains; transports overseas freight through various Atlantic and Gulf Coast ports; and provides logistics services. In addition, it provides bimodal truckload transportation services primarily utilizing RoadRailer trailers, a hybrid technology that facilitates over-the-road and on-the-rail transportation in the eastern United States, as well as in Ontario and Quebec through a network of terminals. Further, the company engages in the acquisition, leasing, and management of coal, oil, gas, and minerals; development of commercial real estate; telecommunications; and leasing or sale of rail property and equipment. The company was founded in 1883 and is based Norfolk, Virginia. (Summary) (Company) (Daily Chart)
| 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% |
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