The 3 Best Railroad Stocks to Buy Now: September 2023
Railroad stocks are often under-appreciated, despite delivering strong top-line and EPS growth over the last decade. While the industry faces macroeconomic uncertainties, investors should take a look at the best railroad stocks to buy. Railroads are one of the most safe and efficient ways to transport goods across state lines and through country borders. The global railroad market was last valued at $281.24 billion and is projected to grow at a CAGR of 5.6% from 2023 to 2030.
While it’s true that the railroad sector, like many others, grapples with macroeconomic challenges and uncertainties, it’s crucial for discerning investors to recognize the potential that lies within and consider diversifying their portfolios with some of the top-performing railroad stocks.
With global freight, high-speed, and passenger rail activity on the rise, these 3 railroad stocks should be on investors’ radar. Below are my top three railroad stocks to buy now.
InvestorPlace - Stock Market News, Stock Advice & Trading Tips
Union Pacific (UNP)
Union Pacific (NYSE:UNP) stock is currently the largest publicly traded railroad stock in the United States.
The company is a staple to the U.S. economy, covering more than 32,000 miles of track across 23 states. After reporting its Q2 2023 financial results, the company saw a decline in revenue and EPS (Earnings Per Share).
Total net revenues were $5.96 billion, down 5% year-over-year. EPS came in at $2.57 per share, down 12% year-over-year. The company also saw a management shakeup, parting ways with its former CEO, Lance Fritz.
Despite rising inventory pressures and slower demand in 2023, UNP saw strong year-over-year growth in 2022. UNP’s total revenue in 2022 was $24.9 billion, up 14% year-over-year. EPS (Earnings Per Share) rose to $11.21, up 13% year-over-year.
Union Pacific is well-positioned to benefit from the Infrastructure Investments and Jobs Act. Road and bridge commodities such as private tank cars, asphalt, cement, rods, beams, and other key metals will fuel growth. They are expanding their reach into new markets with key intermodal terminals in California and Minnesota.
UNP also holds a 26% stake in Ferromex, the largest railway in Mexico. While 2023 will serve as a minor bump in the road, investors should buy Union Pacific stock to unlock long-term shareholder value.
Canadian National Railway (CNI)
Source: Eric Buermeyer / Shutterstock.com
Canadian National Railway (NYSE:CNI) stock is a strong buy despite the company’s underperformance in 2023.
The railroad industry has seen a lackluster in 2023 thus far due to recession fears and higher interest rates.
CN stock has seen a number of challenges including slowing intermodal demand, lower inventories, and sluggish traffic volumes. After reporting their Q2 2023 earnings results, CN now projects negative year-over-year growth in EPS (Earnings Per Share).
CN’s Q2 2023 revenues were $4.06 billion, a decrease of 7% year-over-year. EPS (Earnings Per Share) was $1.76, down 8% year-over-year. While key financial metrics saw declines, CN still saw improvements in its free cash flow, up 8% in the quarter.
CEO, Tracy Robinson remains optimistic about the company’s outlook to accelerate profitable growth and drive sustainability initiatives. The stock has also delivered a 13% CAGR in its dividend over the last decade. Furthermore, management expects EPS (Earnings Per Share) growth in the 10-15% range from 2024-2026.
As the company improves operating efficiencies and recession fears subside, Canadian National Railway is one of the top railroad stocks for 2023.
Canadian Pacific Kansas City (CP)
Source: https://www.cpr.ca/en/media/photos
Canadian Pacific Kansas City (NYSE:CP) is one of the best-performing railroad stocks in 2023, thanks to its recent merger with the U.S. Kansas City Southern.
The combination created the first railway connection between the United States, Canada, and Mexico.
With unrivaled port access, the railway merger connects to Atlantic Canada, the Gulf of Mexico, and Mexico’s Pacific Coast. CPKS has also committed to the expansion of Amtrak’s passenger rail network in the United States.
Amtrak’s 15-year plan will expand passenger rail service in 20 new states, and improve existing corridor rail service in 16 states. Canadian Pacific will indirectly benefit from the $66 billion in new federal funding dedicated to passenger rail infrastructure in the Northeast.
For Q1 2023, total revenue grew to $2.27 billion, up 22% year-over-year. EPS (Earnings Per Share) was $0.86 cents, compared to $0.63 cents in the year prior. Despite poor performance in 2023, CP has strong growth tailwinds in front of it over the next decade. CP is currently strengthening its commodity supply chain, with investments in new hopper cars to service the grain, coal, and fertilizer markets.
The company has also committed $275 million over the next 3 years to improve freight rail safety and capacity in the Upper Midwest states and Louisiana. With increased investment in passenger and freight rail infrastructure, CP stock is one of the best railroad stocks to buy for 2023.
On the date of publication, Terel Miles did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Terel Miles is a contributing writer at InvestorPlace.com, with more than seven years of experience investing in the financial markets.
More From InvestorPlace
ChatGPT IPO Could Shock the World, Make This Move Before the Announcement
Musk’s “Project Omega” May Be Set to Mint New Millionaires. Here’s How to Get In.
The Rich Use This Income Secret (NOT Dividends) Far More Than Regular Investors
The post The 3 Best Railroad Stocks to Buy Now: September 2023 appeared first on InvestorPlace.
