Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 613 railroads in the US transport cargo within a rail network, and include line haul railroads and short line railroads. Major types of rail freight include energy products (18% of industry freight revenue), motor vehicles and equipment (17%), food and beverage products (15%), chemicals (10%) and plastics and rubber (10%). Non-freight related revenue includes fees for rail car switching, rail car hire and rental services, and demurrage (when shippers or receivers hold railcars beyond the contracted period of time).

High Capital Requirements

Rail transport is a highly capital-intensive industry, with most companies having significant investments in tracks, terminals, underlying property, locomotives, and rail cars.

Competition From Alternative Carriers

Railroads compete with alternative modes of transportation, such as trucks, barges, ships, and pipeline operators.

Industry size & Structure

The US freight rail transportation industry consists of 613 railroads, which employ 146,600 workers and generate $80 billion annually in freight revenue.

    • The Association of American Railroads (AAR) classifies rail operators into one of three categories: Class I, regional, and local. Seven Class I railroads generate revenue of $74 billion annually. Regional and local railroads generate $4.6 billion in revenue.
    • Collectively, railroads operate nearly 140,000 miles of track.
    • The average Class I railroad employs 17,000 workers, has 247,000 freight cars and 3,500 locomotives in service, and generates about $10-11 billion annually in freight revenue.
    • The average regional or local railroad employs 24 workers and generates about $10 million in annual revenue.
    • The industry is concentrated at the top; the top seven Class I railroads account for 94% of industry revenue.
    • The seven Class I railroads are BNSF Railway, CSX Transportation, Grand Trunk Corporation (subsidiary of Canadian National Railway), Kansas City Southern Railway, Norfolk Southern, Soo Line Corporation (subsidiary of Canadian Pacific Railway), and Union Pacific Railroad.
    • Domestic firms, including non-Class I carriers, may have operations in foreign countries.
    • Canadian and Mexican-owned railroads have a significant presence in the US. Both countries operate railroads in the US with enough revenue to qualify for Class I classification.
    • The industry includes Amtrak, a federally-chartered company that provides national passenger rail services. Amtrak receives financial support from the federal government and fifteen state governments.
                                    Industry Forecast
                                    Railroads Industry Growth
                                    Source: Vertical IQ and Inforum

                                    Recent Developments

                                    May 4, 2023 - Three Railroads Team Up To Compete With Merged Rivals
                                    • Canadian National, Union Pacific, and Grupo Mexico railroads said in late April that they will work together to quickly move intermodal cars filled with shipping containers from Mexico north across the US to the key hub of Chicago and further north into Canada. Many industry experts say that the announcement is a response to the Canadian Pacific-Kansas City Southern (CPKC) merger. CPKC's new single-line network is currently the only railroad directly connecting all three countries. The three railroads say that they believe their service will be superior to CPKC because Grupo Mexico has a bigger rail network in Mexico and Union Pacific has a more direct route north to Chicago.
                                    • The first major railroad merger in more than two decades was approved in March by the US Surface Transportation Board. Canadian Pacific, the sixth-largest freight railroad by revenue operating in the US, agreed to buy the next-largest carrier, Kansas City Southern, for $31 billion. The combined railroad will not overtake the fifth-largest carrier, Canadian National. Canadian Pacific said it could take control of Kansas City Southern as soon as April 14, creating a new carrier, Canadian Pacific Kansas City, that will span the US, Canada, and Mexico. The Transportation Board said that the new railroad “will facilitate the flow of grain from the Midwest to the Gulf Coast and Mexico, the movement of intermodal goods between Dallas and Chicago and the trade in automotive parts, finished vehicles, and other containerized mixed goods between the United States and Mexico.”
                                    • US Transportation Secretary Pete Buttigieg said that he intends to hold freight railroads to stricter standards following an Ohio train disaster. Buttigieg added that the Biden administration had already been pushing for tighter regulations before the February 3 derailment of a Norfolk Southern freight train carrying hazardous materials in Ohio. The derailment has increased pressure to review regulation of the seven largest freight railroads. Criticism of the industry has increased as railroads reduced crews and routes in efforts to drive up profits. The National Transportation Safety Board (NTSB), which investigates major transportation disasters, said that the Ohio train crew received an overheated wheel bearing alert only shortly before dozens of the train’s cars derailed. “I do have a sense that the railroads just are pushing the envelope much farther than in the long run is in their own self-interest,” NTSB chairman Martin Oberman said in December 2022.
                                    • Three Class I railroads have recently earned recognition for efforts to follow guidelines promoting environmental, social and governance (ESG) values. The Dow Jones Sustainability North America Index named CSX, Canadian Pacific, and CN, to its annual list of companies to achieve high scores on S&P Global’s Corporate Sustainability Assessment. Kansas City Southern's Shreveport, Louisiana, operation received International Organization for Standardization certification for two categories: environmental and occupational health and safety.
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