The American railroads industry is recovering from the pandemic-led disruptions. Moreover, in August, the U.S. Department of Transportation awarded over $233 million to 11 projects in 8 states in order to enhance the critical intercity passenger rail service.
In addition, on the 32nd anniversary of the Americans with Disabilities Act, the Biden administration declared a hefty $1.75 billion to modernize train stations. All such lucrative federal policies are estimated to fortify the railroad industry.
Furthermore, according to Research and Markets, the global market for rail transportation is projected to grow at a CAGR of 4.7% from 2022 to 2026.
Therefore, we think it could be wise to scoop up the shares of fundamentally sound railroad stocks Canadian National Railway Company (CNI), CSX Corporation (CSX), and Westinghouse Air Brake Technologies Corporation (WAB).
Canadian National Railway Company (CNI)
Headquartered in Montreal, Canada, CNI is a rail and related transportation company. The company’s product line includes petroleum, cereals, fertilizers, coal, metals and minerals, forest goods, and automobile items. About 19,500 route miles of track are operated by CNI across both Canada and the United States.
On August 17, 2022, CNI and Keyera Corp. announced the signing of their Memorandum of Understanding to jointly evaluate the creation of a specialized clean energy terminal in Alberta’s Industrial Heartland. This is CNI’s big step ahead toward sustainable development.
In June, CNI declared its plans to invest approximately $20 million in Iowa in 2022. This includes investments in technology, capacity, rolling stock units, company-wide decarbonization initiatives, and network improvements. The company is expected to reap significant benefits from such investments in the near term.
CNI’s total revenues came in at C$4.34 billion ($3.36 billion) for the second quarter ended June 30, 2022, up 20.7% year-over-year. Its net income increased 27.9% year-over-year to C$1.33 billion ($1.03 billion). Moreover, the company’s adjusted EPS increased 29.5% year-over-year to C$1.93.
Analysts expect CNI’s revenue to increase 6.3% year-over-year to $12.22 billion in 2022. Its EPS is estimated to increase 17% year-over-year to $5.29 in 2022. Over the past year, the stock has gained 15.6% to close the last trading session at $124.99.
CNI’s POWR Ratings reflect this promising outlook. The company has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
CNI has an A grade for Stability and a B for Momentum and Quality. Within the B-rated Railroads industry, it is ranked #4 out of 15 stocks. Click here to see the additional POWR Ratings for Value, Growth, and Sentiment for CNI.
CSX Corporation (CSX)
CSX and its subsidiaries offer rail-based freight transportation services. The company operates around 19,500 route mile rail network, which serves various population centers in 23 states east of the Mississippi River, the District of Columbia, and the Canadian provinces of Ontario and Quebec.
On June 1, 2022, CSX completed the acquisition of Pan Am Railways, Inc. James M. Foote, President, and CEO, said, “This acquisition demonstrates CSX’s growth strategy through efficient and reliable freight service and will provide sustainable and competitive transportation solutions to New England and beyond.”
CSX’s revenue came in at $3.82 billion for the second quarter ended June 30, 2022, up 27.6% year-over-year. Its net earnings increased marginally year-over-year to $1.18 billion. Moreover, the company’s EPS increased 3.7% year-over-year to $0.54.
Street expects CSX’s revenue to increase 17.7% year-over-year to $14.74 billion in 2022. Its EPS is estimated to increase 20.6% year-over-year to $1.87 for the same period. It surpassed EPS estimates in all four trailing quarters. Over the past month, the stock has gained 8.8% to close the last trading session at $33.62.
CSX's overall B rating equates to a Buy in our POWR Ratings system. It has a B grade for Quality, Momentum, and Sentiment. It is ranked #3 in the same industry. Beyond what is stated above, we’ve also rated CSX for Value, Stability, and Growth. Get all CSX ratings here.
Westinghouse Air Brake Technologies Corporation (WAB)
WAB provides technology-based products, services, and systems to the passenger and freight rail transportation sectors, worldwide. It operates through two segments, Freight and Transit.
On August 9, 2022, WAB marked the grand opening of its first Transit Performance Optimization Center (TPOC) for Europe. This new center aims to improve operational performance and reduce service costs with real-time monitoring and analytics.
On July 20, 2022, WAB announced a contract to supply heating, ventilation, and air conditioning (HVAC) units for 56 new Stadler trains that will be operated by the Metropolitan Atlanta Rapid Transit Authority (MARTA). This demonstrates WAB’s goodwill in the market.
WAB’s net sales increased marginally year-over-year to $2.05 billion for the second quarter ended June 30, 2022. Its net income increased 32.8% year-over-year to $166 million, while its EPS increased 37.9% year-over-year to $0.91.
WAB’s revenue is expected to increase 7.1% year-over-year to $8.38 billion in 2022. Its EPS is estimated to increase by 7.3% per annum for the next five years. In addition, it surpassed consensus EPS estimates in each of the trailing four quarters. Over the past month, the stock has gained 7% to close the last trading session at $91.88.
WAB has an overall B rating, equating to a Buy in our POWR Ratings system. It has a B grade for Growth and Quality. It is ranked #2 in the same industry. We have also rated WAB for Value, Sentiment, Momentum, and Stability. Get all WAB ratings here.
CNI shares were trading at $126.03 per share on Thursday afternoon, up $1.04 (+0.83%). Year-to-date, CNI has gained 3.57%, versus a -11.60% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
3 High-Quality Railroad Stocks That Are Buys Today StockNews.com
