enviro111

Railroad Companies: Good, Better, Best

A clear and useful analysis.

1. I completely agree with point #1. As peak oil approaches, fuel costs will rise and rails will look wonderful compared with trucks and planes.

2. The article focuses on freight rail. However, passenger rail will be the big money maker at some point - unless the government kills it. If this is the case, the Eastern rails will have a clear advantage because of the higher population density.

3. If you look at the long term chart of the six major rails, starting int 1980, you will see that CNI has the best return. It currently has the highest ROI and profit margins. It is also the most expensive. It is an Eastern rail with the inclusion of the old Illinois Central.
the next best returns are the NSC and the CSX. these are both Eastern. BNI leads UNP and CP. UNP is the worst.

Perhaps UNP is laggard because of the southern pacific acquisiton?

4. CNI and BNI are currently the most expensive. CSX was extremely expensive but has recently declined. CP is cheap and sells practically at book value.

5. If you look just a geography you might see that the Eastern ones have an advantage in terms of density and less maintenance. Shorter distances between points means less maintenance. Also fewer mountains to go up and down - saving on fuel costs.

6. Eventually, I see the government taking the rails back over again when they recover. The US government loves to destroy successful industries (i.e., rail - decades ago, auto - in the 1950's and 1960's, oil - currently, big Pharma) and reward inefficient ones (i.e., banks and autos currently).