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Top Railroad Stocks for Q1 2022

The railroad industry is one of the major components of the transportation sector and is closely tied to the economy’s growth. Railroad companies operate vast networks that transport agricultural products, packaged foods, commodities, electronics, and other goods to companies and consumers. Major companies in the industry include Union Pacific Corp. (UNP), Norfolk Southern Corp. (NSC), and CSX Corp. (CSX).

The railroad industry does not have its own benchmark, but as a part of the broader transportation sector, its performance can be reasonably approximated by the iShares Transportation Average ETF (IYT). IYT has underperformed the broader market with a total return of 20.6% over the past 12 months, below the Russell 1000’s total return of 23.0%. These performance figures and all others below are as of Jan. 11, 2022.

Here are the top 3 railroad stocks with the best value, the fastest growth, and the most momentum.

Best Value Railroad Stocks

These are the railroad stocks with the lowest 12-month trailing price-to-earnings (P/E) ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows you’re paying less for each dollar of profit generated.

Best Value Railroad Stocks
 
Price ($)
Market Cap ($B)
12-Month Trailing P/E Ratio
Canadian Pacific Railway Ltd. (CP)
74.75
49.9
20.2
CSX Corp. (CSX)
36.30
80.5
22.8
Canadian National Railway CO. (CNI)
122.28
86.4
23.3

Source: YCharts

Canadian Pacific Railway Ltd.: Canadian Pacific Railway is a Canada-based company that offers rail transportation services, including intermodal shipping, rail siding construction, and logistics services. The company announced in mid-December that it has completed its acquisition of Kansas City Southern (KSU), a cross-border railroad between the U.S. and Mexico, for approximately $31 billion. The shares of Kansas City Southern were placed in a voting trust upon the close of the acquisition, ensuring that the railroad operates independently of Canadian Pacific until the U.S. Surface Transportation Board makes a decision on the companies’ joint railroad control application. The board’s review of Canadian Pacific’s proposed control of Kansas City Southern is expected to be finalized during the fourth quarter of 2022.
CSX Corp.: CSX is a transportation company that provides rail, intermodal, and rail-to-truck transload services and solutions. It serves customers in a variety of markets, including energy, industrial, construction, agricultural, and consumer products.
Canadian National Railway Co.: Canadian National Railway is a Canada-based transportation company that offers fully-integrated rail and other transportation services, including intermodal, trucking, freight forwarding, warehousing, and distribution.

Fastest Growing Railroad Stocks

These are the top railroad stocks as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly YOY percentage revenue growth and their most recent quarterly YOY earnings-per-share (EPS) growth. Both sales and earnings are critical factors in the success of a company.

On Nov. 15, 2021, President Biden signed into law the Infrastructure Investment and Jobs Act, which will invest approximately $550 billion in America’s roads and bridges, water infrastructure, resilience, internet, and more. Of this $550 billion, $66 billion will be allocated to improving America’s passenger and freight rail system.

Therefore ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter (such as changes in tax law or restructuring costs) that may make one or the other figure unrepresentative of the business in general. Companies with quarterly EPS or revenue growth of over 2,500% were excluded as outliers.

Fastest Growing Railroad Stocks
 
Price ($)
Market Cap ($B)
EPS Growth (%)
Revenue Growth (%)
Canadian National Railway Co. (CNI)
122.28
86.4
81.7
11.5
CSX Corp. (CSX)
36.30
80.5
34.4
24.3
Trinity Industries Inc. (TRN)
30.87
3.0
57.1
9.6

Source: YCharts

Canadian National Railway Co.: See company description above.
CSX Corp.: See company description above.
Trinity Industries Inc.: Trinity Industries provides rail transportation products and services in North America. It offers railcar leasing and management services, as well as railcar manufacturing and modifications. The company announced in October financial results for Q3 of its 2021 fiscal year (FY), the three-month period ended Sept. 30, 2021. Net income attributable to shareholders rose 27.5% compared to the year-ago quarter. Revenue rose 9.6% YOY. Trinity Industries said that results were adversely impacted by labor shortages, turnover, and disruptions in supply chains, partly due to the economic impact of the COVID-19 pandemic. However, it expects profitability and demand for railcars to continue improving.

Railroad Stocks With the Most Momentum

These are the railroad stocks that had the highest total return over the last 12 months.

Railroad Stocks with the Most Momentum
 
Price ($)
Market Cap ($B)
12-Month Trailing Total Return (%)
Greenbrier Companies Inc. (GBX)
40.82
1.3
17.2
Union Pacific Corp. (UNP)
246.42
158.4
15.6
CSX Corp. (CSX)
36.30
80.5
14.7
Russell 1000
N/A
N/A
23.0
iShares Transportation Average ETF (IYT)
N/A
N/A
20.6

Source: YCharts

Greenbrier Companies Inc.: Greenbrier Companies is a supplier of equipment and services to global freight transportation markets. The company designs and manufactures freight railcars and marine barges in North America, Europe, and Brazil. It also provides freight railcar wheel services, parts, maintenance, and retrofitting services in North America. Greenbrier announced in late October the appointment of President and Chief Operating Officer (COO) Lorie Tekorius, to the role of chief executive officer (CEO), effective March 1, 2022. Co-founder, Chairman, and CEO William A. Furman will assume the newly created role of Executive Chair on that same date.
Union Pacific Corp.: Union Pacific connects 23 states in the western two-thirds of the U.S. by rail. It operates rail transportation services from all major West Coast and Gulf Coast ports to eastern gateways, connects with Canada’s rail systems, and serves all six major Mexico gateways. The company announced in December that its board of directors approved a 10% increase in the quarterly dividend on the company’s common shares, bringing it to $1.18 per share. The dividend was payable on Dec. 30, 2021 to shareholders of record as of Dec. 20, 2021.
CSX Corp.: See above for company description.

The comments, opinions, and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or to adopt any investment strategy. While we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described in our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy.

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