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4 Stocks to Watch as Railroad Industry Continues to Rebound

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Kaustav Ghosh
·4 min read
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The railroad industry in the United States took a hit during the early part of last year due to the COVID-19 pandemic as operations were affected. Nonetheless, the industry seems to be recovering from the slump. Notably, per a report by the Association of American Railroads, total U.S. rail traffic for the week ended Mar 6, was 515,135 carloads and intermodal units, reflecting an increase of 11.4% from the same week of last year.

The report stated that total carloads, for the week ended Mar 6, were 232,494, up 1.1% from the same week last year while intermodal volume was 282,641 containers and trailers, up 21.5% on a year-over-year basis. Moreover, the total combined U.S. traffic for the first nine weeks of 2021 has also seen a rise as traffic was 4,459,289 carloads and intermodal units, witnessing an increase of 1.7% year over year, suggesting that an upswing might be in the cards as the economy continues to reopen.

In fact, North American transborder freight also ended 2020 on a positive note. Per a report by the Bureau of Transportation Statistics, railways moved $14.1 billion of freight in December, witnessing a rise of 1.6% compared to November 2020.

Meanwhile, the vaccination drive in the United States should also provide more fuel to the railroad industry. Toward that end, 109 million vaccine doses have been given so far in the country, as quoted in a Bloomberg article. The article further stated that an average of 2.43 million doses per day was administered last week, highlighting a steady pick-up.

Such positive developments are sure to aid the railroad industry as it continues to recover from the pandemic-induced slump. Moreover, President Joe Biden’s resolution to bring about the second great railroad revolution to ensure that America has the cleanest, safest, and fastest rail system in the world in terms of both passengers and freight should also provide a necessary boost to the industry.

Meanwhile, Moody’s also stated in a report published on Oct 29, 2020 that it had upgraded its outlook for the North American railroad transportation to stable from negative as it expected growth in shipments of most types of freight over the next 12 to 18 months. Reflective of these progresses, IBISWorld also mentioned in a report that it expects rail transportation in the United States to grow 3.2% in 2021.

4 Railroad Stocks to Keep an Eye On

The railroad industry in the United States looks set to continue its recovery from the COVID-19-induced slump last year. Notably, pickup in the vaccination drive in the country as well as President Biden’s promised focus on the industry should also provide the necessary support. Hence, this makes it a prudent time to look at railroad stocks that can benefit from this potential going forward. Notably, we have selected four such stocks that carry a Zacks Rank #2 (Buy) or 3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Kansas City Southern KSU, a transportation holding company, provides domestic and international rail transportation services in North America. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings increased 7.3% over the past 60 days. The company’s expected earnings growth rate for the current year is 29.6%.

Norfolk Southern Corporation NSC, together with its subsidiaries, engages in the rail transportation of raw materials, intermediate products, and finished goods in the United States. The company currently has a Zacks Rank #3. The Zacks Consensus Estimate for its current-year earnings increased 0.5% over the past 60 days. The company’s expected earnings growth rate for the current year is 19.7%.

Union Pacific Corporation UNP, through its subsidiary, Union Pacific Railroad Company, engages in the railroad business in the United States. The company currently has a Zacks Rank #3. The Zacks Consensus Estimate for its current-year earnings increased 2.4% over the past 60 days. The company’s expected earnings growth rate for the current year is 15.8%.

CSX Corporation CSX, together with its subsidiaries, provides rail-based freight transportation services. The company currently has a Zacks Rank #3. The Zacks Consensus Estimate for its current-year earnings increased 0.7% over the past 90 days. The company’s expected earnings growth rate for the current year is 17.8%.

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