In this article, we will take a look at the five best railroad stocks to invest in. If you want to read our detailed analysis of the railroad industry and more stocks, then head on over to 10 Best Railroad Stocks to Invest In.
5. Canadian National Railway Company (NYSE:CNI)
Number of Hedge Fund Holders: 38
Canadian National Railway Company (NYSE:CNI) is a rail transport services provider that is headquartered in Montreal, Canada. The company serves several industries such as agriculture, mining, forestry, petroleum, and fertilizers. It has thousands of miles of track in the United States and Canada.
Canadian National Railway Company (NYSE:CNI) reported $3.7 billion in revenue and $1.32 in non-GAAP EPS for its fiscal first quarter. CIBC set a CAD$167 price target for the company in June 2022 and upgraded the shares to Outperform from Neutral.
Out of the eleven different industries that it targets for shipping, the Canadian National Railway Company (NYSE:CNI) grew its orders in all but one during its latest quarter. Since it pays out a dividend, the fact that the company’s free cash flows can increase in the future is good news for investors that love dividends. Canadian National Railway Company (NYSE:CNI)’s book value has also increased by 62% over the past ten years, its free cash flows are set to grow as well, and it has low debt levels.
Insider Monkey’s 912 hedge fund survey for Q1 2022 saw 38 firms as having bought Canadian National Railway Company (NYSE:CNI)’s shares.
Canadian National Railway Company (NYSE:CNI)’s largest investor is Chris Hohn’s TCI Fund Management which owns 36 million shares that are worth $4.9 billion.
4. Westinghouse Air Brake Technologies Corporation (NYSE:WAB)
Number of Hedge Fund Holders: 40
Westinghouse Air Brake Technologies Corporation (NYSE:WAB) is one of the oldest rail manufacturers in the world. The company builds freight locomotives and provides other components and services for this segment as well. Additionally, it also manufactures passenger trains. It was set up in 1869 and is headquartered in Pittsburg Pennsylvania.
Atlantic Equities set a $101 share price target for Westinghouse Air Brake Technologies Corporation (NYSE:WAB) in May 2022, as it outlined that the company is a global leader in its industry and is poised for strong growth. Insider Monkey scanned 912 hedge fund portfolios for the first quarter of this year to discover that 40 had invested in the company.
Looking at the future, Westinghouse Air Brake Technologies Corporation (NYSE:WAB) is already on the road to electrification after having partnered with General Motors. The company will roll out its first electric railcars next year. When combined with the current high fuel prices, the shift to electric is a second attractive reason to consider Westinghouse Air Brake Technologies Corporation (NYSE:WAB).
By the end of its fiscal Q1, Westinghouse Air Brake Technologies Corporation (NYSE:WAB) had earned $1.9 billion in revenue and $1.13 in non-GAAP EPS, beating Wall Street EPS estimates but missing them for revenue. The company announced in June 2022 that it had entered into an agreement with a large Canadian rail company to deploy a management system.
Richard S. Pzena’s Pzena Investment Management is Westinghouse Air Brake Technologies Corporation (NYSE:WAB)’s largest investor. It holds 9.9 million shares that are worth $961 million.
3. Norfolk Southern Corporation (NYSE:NSC)
Number of Hedge Fund Holders: 48
Norfolk Southern Corporation (NYSE:NSC) is an American railroad transportation services provider that serves industrial consumers. The company is capable of transporting a wide variety of materials and products such as oil, fertilizers, wood, and chemicals. It is headquartered in Atlanta, Georgia.
Norfolk Southern Corporation (NYSE:NSC) brought in $2.9 billion in revenue and $2.93 in GAAP EPS during its fiscal first quarter. This saw it beat analyst revenue estimates but miss them for EPS.
Despite a weak quarter for the industry, these revenues grew, indicating management expertise in navigating a tough environment. More crucially, this came despite Norfolk Southern Corporation (NYSE:NSC) increasing its capital expenditure. Throughout the course of this year, the company also expects to grow its revenue in high single digits, despite the fact that the future of the railroad industry will take some hits before improving.
48 out of the 912 hedge funds part of Insider Monkey’s Q1 2022 poll had invested in Norfolk Southern Corporation (NYSE:NSC).
Norfolk Southern Corporation (NYSE:NSC)’s largest investor is Israel Englander’s Millennium Management which owns one million shares. These enable it to hold a $291 million stake.
2. CSX Corporation (NASDAQ:CSX)
Number of Hedge Fund Holders: 72
CSX Corporation (NASDAQ:CSX) is a rail freight transportation services provider. It focuses its efforts on providing freight transportation, transports products via railroad, and offers other complimentary services such as transferring products from rail to trucks. The company is headquartered in Jacksonville, Florida, United States.
In another example of the ongoing consolidation in the railroad industry, CSX Corporation (NASDAQ:CSX) announced in June 2022 that it had acquired the railroad company Pan Am Railways, enabling CSX Corporation (NASDAQ:CSX) to expand its presence in the Northeastern United States.
As its fiscal first quarter came to an end, CSX Corporation (NASDAQ:CSX) reported that it had earned $3 billion in revenue and $0.39 in GAAP EPS, beating analyst estimates for both metrics. Insider Monkey took a look at 912 hedge fund portfolios for the first quarter of this year to discover that 72 had invested in the company.
The Pan Am acquisition gives CSX Corporation (NASDAQ:CSX) a unique strategic advantage. It allows the company to gain a larger share of the U.S. commodities shipping market, which is crucial given the current environment.
Eric W. Mandelblatt’s Soroban Capital Partners is CSX Corporation (NASDAQ:CSX)’s largest investor. It owns 40.9 million shares that are worth $1.5 billion.
1. Union Pacific Corporation (NYSE:UNP)
Number of Hedge Fund Holders: 89
Union Pacific Corporation (NYSE:UNP) is one of the oldest railroad companies in America. The company offers freight transportation services for a large variety of products. These include fertilizers, grains, coal, ethanol, petroleum, and chemical products. The company was set up as the civil war picked up in U.S. history in 1862, and it is headquartered in Omaha, Nebraska.
Union Pacific Corporation (NYSE:UNP) earned $5.86 billion in revenue and $2.57 in GAAP EPS during its first fiscal quarter, allowing it to beat analyst estimates for both metrics by a hairline. Insider Monkey’s 912 hedge fund survey for this year’s March quarter saw 89 as having invested in the company.
Evercore ISI set a $245 price target for the company in May 2022. It explained that while the sector represents a relatively safe set of stocks for investment, it still is not immune to economic headwinds.
Union Pacific Corporation (NYSE:UNP)’s dividend yield of 2.45% makes it a decent income play amid the current volatile environment. Additionally, the fact that the company is slated to grow free cash flows to $6.9 billion this year makes it an attractive stock. Higher prices, a fuel surcharge and regular buybacks are other attractive points for the company.
Union Pacific Corporation (NYSE:UNP)’s largest investor is Chris Hohn’s TCI Fund Management which owns 5.2 million shares that are worth $1.4 billion.
Disclosure: None. You can also take a look at 10 Best Pharmaceutical Stocks to Buy in 2022 and 10 Best Recession Stocks To Buy.
