Railroads
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
Recent Developments
Jul 15, 2024 - Weak Sales Growth Expected
- 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. Railroads slightly increased their prices during the first five months of 2024, according to the US Bureau of Labor Statistics (BLS). Industry employment decreased slightly during the first five months of 2024, according to the BLS.
- A new federal rule requires railroads to provide details of hazardous cargo immediately after a derailment. The rule aims to ensure that first responders can find out what hazardous chemicals are on a train almost immediately after a derailment so they can respond appropriately. The local fire chief in charge of the response to the 2023 Norfolk Southern derailment in East Palestine, OH, said that it took him 45 minutes to learn exactly what was in the 11 burning tank cars on the train, but some firefighters from neighboring departments that came to help said they didn’t know what they were dealing with until two hours after the crash. First responders need to know exactly which hazardous materials are on a train so they can look it up in the government’s official guidebook and make sure they have the right protective gear and firefighting tools, said Tristan Brown, deputy administrator of the Pipelines and Hazardous Materials Safety Administration agency that proposed the rule.
- 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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