Industry Profile Report

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

Industry Overview Industry Structure, How Firms Opertate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

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

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

Industry Profile Excerpts

Industry Overview

The 600 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 637 railroads, which employ 149,200 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

                                    Coronavirus Update

                                    May 16, 2022 - COVID-19 Illnesses Plummet
                                    • Illness related to COVID-19 affected 928 railroad employees during the week ending on May 7, the lowest total since June 2020.
                                    • The AFL-CIO labor union told the Surface Transportation Board rail regulator that freight railroad operators are contributing to rail delays and straining the nation’s food and energy supply chains by reducing employee counts to streamline operations. It specifically called out grain companies’ concerns about disruption on tracks operated by Union Pacific, Burlington Northern Santa Fe, and Norfolk Southern Corporation. Rail labor unions, along with agriculture and energy shippers, say precision-scheduled railroading has allowed for leaner operations, but at the expense of job cuts and service problems. PSR is a strategy used by railroads to streamline their operations by adjusting their scheduling and using fewer rail cars.
                                    • Major US railroad companies have been raising fees for freight stuck in supply chain bottlenecks while lowering costs, according to Accountable.US. The nonprofit group that examines corporations and special interests said that the seven major railways, which dominate an industry that carries about 40% of US freight, collected a record $1.18 billion in fees for freight stuck in supply chain bottlenecks in the first nine months of 2021. Companies also lowered expenses through the use of "precision scheduled railroading," which involves streamlining schedules and cutting staff sizes and locomotive and car fleets, the group said. The railroads' fees had increased before the pandemic at a rate 10 times higher than expenses since 2002.
                                    • The Biden administration withdrew in late January its Covid-19 vaccine-or-test requirements for businesses with 100 or more employees. The withdrawal followed a Supreme Court decision to block the rule. Experts say that the Supreme Court majority sent a clear message that the Occupational Safety and Health Administration (OSHA), which is charged with protecting workplace safety, had overstepped its authority with the regulation. The justices said, however, that a separate agency could issue a rule to protect the health and safety of Medicare and Medicaid patients.
                                    • Global trade is expected to have totaled about $28 trillion in 2021, a 23% year-over-year increase, but the outlook for 2022 remains very uncertain, according to UN trade and development body UNCTAD. “Lower-than-expected economic growth rates are generally reflected in more downcast global trade trends,” UNCTAD noted, while also pointing to inflationary pressures” that may also negatively impact national economies and international trade flows.
                                    • Employment in the railroad industry decreased 0.8% year over year in April and was down 18.8% compared to the pre-pandemic month of April 2019.
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