For Immediate Release
Chicago, IL – September 17, 2012 – Today, Zacks Equity Research discusses the U.S. Railroads, including Union Pacific Railroad (UNP), CSX Corporation (CSX), Norfolk Southern Railway (NSC), Canadian National Railway (CNI) and Kansas City Southern Railway (KSU).
A synopsis of today’s Industry Outlook is presented below. The full article can be read at
Investment by railroad operators for product and service improvement is far ahead of other transportation industries. Very few U.S. industries can match railroad operators with respect to the high capital investment rate. Investments in capacity, innovations and use of several state-of-the-art technologies have led to service improvements and enhanced reliability.
Currently, the U.S. railroad industry dominates less than 50% of total freight in America , indicating a huge opportunity to increase market share. This opportunity can only be exploited through building railroad infrastructure that caters to the varied requirements of shippers.
According to the Department of Transportation, the demand for rail freight transportation will increase approximately 88% by 2035. As a result, Class I carriers would have to expedite their investments to meet this growing demand. It is estimated that railroads would require $39 billion, approximately $1.4 billion per year of investments, to improve rail network infrastructure.
The AAR claims that freight rail transporters together invested a significant amount of $44 billion in the previous two years for railroad track expansion and maintenance. In recent years, railroads have been investing roughly 17% of their annual revenue on capital expenditures. Major freight railroads are expected to invest approximately $13 billion in capital expenditures in 2012. Additionally, these railroads also expect to grow their workforce by over 15,000 this year to meet operational requirements.
Currently, we maintain our long-term Neutral recommendation on Union Pacific Railroad (UNP), CSX Corporation (CSX), Norfolk Southern Railway (NSC), Canadian National Railway (CNI) and Kansas City Southern Railway (KSU). For the short term (1–3 months), these stocks hold a Zacks #3 Rank (Hold) except for Canadian National and Union Pacific Corporation, which retain a Zacks #2 Rank (Buy).
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