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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), Hong Kong-based MTR Corporation Ltd., and CSX Corp. (CSX). Railroad stocks, as represented by the SPDR S&P Transportation ETF (XTN), have underperformed the broader market. They have a total return of -39.4% compared to the S&P 500’s total return of -17.6% over the past 12 months. These market performance numbers and the statistics in the tables below are as of March 23.
Here are the top 3 railroad stocks with the best value, the fastest earnings 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.
- Central Japan Railway Co.: Central Japan Railway is a Japan-based company primarily focused on railway services. The company also offers bus transportation and real estate services, and operates department stores, hotels, restaurants, and construction businesses. Central Japan Railway announced recently the suspension of some train services due to the spread of COVID-19.
- Greenbrier Companies Inc.: Greenbrier Companies is primarily engaged in the design, manufacture, and marketing of railroad freight car equipment. The company manufactures both railcars and marine vessels, provides repair and refurbishment for intermodal and conventional railcars, and provides complementary leasing and services. Greenbrier Companies reported year-over-year (YOY) revenue growth of 27.3% and YOY net earnings growth of 2.7% for the first quarter of its 2020 fiscal year (FY), which ended November 30, 2019.
- West Japan Railway Co.: West Japan Railway is a Japan-based provider of passenger railway transport services. The company also operates department stores, convenience stores, restaurants, and shopping centers. It also engages in the sale and leasing of real estate, rental of automobiles and equipment, and other activities.
Fastest Growing Railroad Stocks
These are the railroad stocks with the highest YOY earnings per share (EPS) growth for the most recent quarter. Rising earnings show that a company’s business is growing and is generating more money that it can reinvest or return to shareholders.
- Westinghouse Air Brake Technologies Corp.: Westinghouse Air Brake Technologies provides technology-based equipment and services for the global freight and transit rail industries. The company reported net sales growth of 87.9% and net income growth of 11.9% in 2019.
- 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 December the completion of its acquisition of the Central Maine & Quebec Railway (“CMQ”).
- Central Japan Railway Co.: See above for company description.
Railroad Stocks with the Most Momentum
These are the railroad stocks that had the highest total return over the last 12 months. Two of the top momentum railroad stocks had negative total returns over the past year, but they were still among the top three performers amid a market that has fallen dramatically over the past month.
|Railroad Stocks with the Most Momentum|
|Price ($)||Market Cap ($B)||12-Month Trailing Total Return (%)|
|Canadian Pacific Railway Ltd. (CP.TO)||CA$268.16||CA$36.7||1.7|
|Kansas City Southern (KSU)||108.52||10.8||-2.8|
|West Japan Railway Co. (WJRYY)||65.67||12.6||-11.1|
|S&P 500 (SPY)||N/A||N/A||-17.6|
|SPDR S&P Transportation ETF (XTN)||N/A||N/A||-39.4|
- Canadian Pacific Railway Ltd.: See above for company description.
- Kansas City Southern: Kansas City Southern is a holding company that, through its subsidiaries, operates a railroad system providing shippers with freight services in commercial and industrial markets in the U.S. and Mexico. The company reported revenue growth of 5.6% in 2019 as net income fell 14.1%.
- West Japan Railway Co.: See above for company description.
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