These 3 Railroad Stocks Are Heating Up
Ever since the conflict between Russia and Ukraine began, certain areas of the market have been moving fast. A lot of this has to do with the widespread economic changes that could come out of this geopolitical issue. Look no further than the move in the energy sector for proof that the world is changing quickly. With crude oil prices spiking to 13-year highs given the supply disruptions caused by the invasion and the potential for a full ban on Russian oil and natural gas, any companies that offer an alternative solution could be in for a huge year.
Railroad companies are the perfect example – as these businesses offer an alternative form of transportation thanks to their fuel efficiency. Several of the top railroad stocks are attempting a breakout at this time and could end up being great long-term investments even if oil prices reverse. Each one of these companies plays a vital role in the economy and pays out dividends to long-term shareholders, making them a very intriguing group to consider adding during an uncertain period in the stock market.
Here are 3 reputable railroad stocks to buy now:
First up is Union Pacific, a blue-chip railroad stock that is breaking out to new all-time highs following months of consolidation. It’s the largest public railroad in North America, with over 30,000 miles of track covering an area between the West Coast and Eastern Gateway, as well as Mexico. Union Pacific
transports a variety of different products for its customers including chemicals, coal, automotive products, agricultural goods, industrial products, and other commodities, and it’s easy to envision lots of shippers looking to this company as a more affordable alternative to truck transportation given the way oil prices are taking off.
Union Pacific is also worth a look thanks to the way the company has been working hard over the last few years to improve its profitability. A focus on precision scheduled railroading, investing in new or extended sidings that add capacity, and hiking prices should all pay off over the long term. The stock also offers investors a 1.78% dividend yield, with the company hiking its payout by 10% last December. Union Pacific reported record profits for 2021 and provided an upbeat outlook for 2022, and with the way fuel prices are skyrocketing it’s hard to imagine a better scenario for this massive railroad business going forward.
Another solid pick for exposure to railroads is CSX, a company that provides rail, intermodal, and rail-to-truck trainload services. With over 20,000 miles of rail network in the eastern United States, this is another company that should see its volumes increase if fuel prices remain elevated. CSX stands out due to its heavy intermodal volumes, which tend to be a more cost-effective mode of transportation thanks to the fact that intermodal units are usually finished goods versus heavy bulk materials. Keep in mind that the rapidly growing e-commerce industry could lead to even more intermodal shipping as well, which should lead to long-term revenue growth for CSX.
CSX recently saw its Q4 revenue grow by 21% year-over-year to reach $3.43 billion, which was driven by growth across all major lines of business. As a reminder, CSX had to deal with some negative earnings impacts from the pandemic, which tells us that the company's earnings are poised for a strong rebound as those issues subside in the coming months. CSX
stock is on the verge of breaking out here, so keep an eye on how share perform in the coming sessions if you’re interested in one of the top names in the railroad industry.
Norfolk Southern (NYSE: NSC)
Finally, we have Norfolk Southern, a railroad company hauling shipments of coal, intermodal traffic, automobiles products, agricultural products, metals, chemicals, and more across roughly 21,000 miles of track in the Eastern United States. Like many of the major railways, Norfolk Southern has been prospering from the global supply chain crisis due to lower expenses and the fees it collects from cargo that is delayed. This could lead to strong earnings for the upcoming quarters, especially if more shippers decide to avoid paying for record fuel prices and use railways as their mode of transportation.
Norfolk Southern also has a strong balance sheet and a long history of paying dividends, which is certainly appealing in the current market environment. Most recently, the company boosted its quarterly dividend by 14%, which should provide investors with extra confidence in the company’s prospects going forward. According to MarketBeat’s consensus
analyst price target of $303.60, the stock could have over 9% of upside from current levels, making it a great one to watch if you are interested in adding rails to your portfolio.
Before you consider Norfolk Southern, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Norfolk Southern wasn't on the list.
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