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 Union Pacific, CSX Transportation, 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

                                    May 17, 2024 - Firms Decrease Prices
                                    • Railroads slightly decreased their prices during the first quarter of 2024 following a moderate increase during the second half of 2023, according to the US Bureau of Labor Statistics (BLS). Industry employment was unchanged during the first quarter of 2024, according to the BLS. Railroad industry sales are forecast to grow at a 2.31% compounded annual rate from 2024 to 2028, slower than the growth of the overall economy, according to Inforum and the Interindustry Economic Research Fund, Inc.
                                    • US railroad carloads increased 1.2% month over month but decreased 6.5% year over year in April, according to the Association of American Railroads (AAR). Intermodal volume increased 8.6% year over year during the period. Nine of the 20 carload commodity categories tracked by the AAR posted year-over-year carload gains. They included motor vehicles and parts, up 12.1%; petroleum and petroleum products, up 13.8%; and chemicals, up 2.9%. Commodities that logged decreases included coal, -28%; metallic ores, -16.9%; and crushed stone, sand, and gravel, -4.4%. "US rail carloads declined in April primarily due to decreased coal shipments," AAR Chief Economist Rand Ghayad in a press release. "Excluding coal, year-over-year carload volumes have experienced a three-month consecutive increase."
                                    • The lean operating model that major freight railroads have embraced for several years is renewing concerns among unions and regulators about the effects that the cuts might have on safety and service, according to the Associated Press (AP). The model relies on fewer, longer trains that require fewer locomotives, workers, and railcars. The industry workforce has been reduced by a third over the last several years, according to the AP. The chairman of the Surface Transportation Board said in early March that he believes Wall Street’s focus on boosting short-term profits, stock buybacks, and dividends undermines safety and service. He also noted that the recent investor pressure on Norfolk Southern and Union Pacific could prompt every rail CEO to back away from investing for the long run.
                                    • Canadian Pacific Kansas City (CPKC) was the only Class I railroad that reported higher transport volume in 2023, according to the Association of American Railroads (AAR). CPKC’s traffic increased 0.1% in 2023. Rail traffic in the US, Canada, and Mexico was down a combined 2.1% in 2023, according to the AAR.
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