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 six Class I railroads are Union Pacific, BNSF Railway, Canadian National Railway, Kansas City Southern Railway, Norfolk Southern Railway, and Canadian Pacific Railway.
    • 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

                                    Nov 14, 2023 - Firms Decrease Prices
                                    • Railroads slightly decreased their prices in the first nine months of 2023 to match decreasing demand for their services. Industry employment was unchanged during the period. Railroads industry sales are forecast to grow at a 2.13% compounded annual rate from 2022 to 2027, slower than the growth of the overall economy.
                                    • The US Transportation Security Administration (TSA) renewed cybersecurity directives for passenger and freight railroad carriers that were set to expire in October. The rules — split into three separate directives — mandate that operators test parts of their cybersecurity incident response plans every year, submit annual updated cybersecurity assessment plans to TSA, and report on the effectiveness of the efforts. Carriers are mandated to develop network segmentation policies and controls that separate operational technology systems from general IT systems in case of compromise.
                                    • The major freight railroads say that a disagreement over whether they will be allowed to discipline some workers who use a government hotline to report safety concerns has kept them from joining the hotline program created after a February Ohio derailment prompted calls for reforms. Unions and workplace safety experts say that the idea of disciplining workers who report safety concerns undermines the purpose of creating such a hotline because workers won’t use it if they fear retribution. The head of the Association of American Railroads trade group said in a letter to US Transportation Secretary Pete Buttigieg that the railroads’ concern is that the system could be abused by workers who try to avoid discipline by reporting situations a railroad already knows about to the hotline.
                                    • Canadian National, Union Pacific, and Grupo Mexico railroads said 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.”
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