5 Reasons There Is Only One Choice In This Industry: Union Pacific Corporation (UNP), CSX Corporation (CSX)

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Union Pacific’s superior results also have led to a relatively stronger balance sheet than their competition. Using the debt-to-equity ratio, Union Pacific shows a ratio of 0.44. As you may have guessed, CSX’s balance sheet is weaker with a ratio of 1.01, and Norfolk Southern is weaker as well at 0.86.

There Is One Big Reason For This Superior Performance
Like it or not, the coal industry has been under pressure for some time now. When you consider that all three major railroads saw coal volumes drop in the current quarter, it’s fairly obvious the industry is struggling. Sometimes outperforming your competition means limiting your exposure to a troubled industry. Union Pacific shows they have an advantage here again as coal represents 20.08% of their overall volume. In addition, the company saw coal volumes drop by 7%, which was better than their competitors. CSX by comparison has the highest exposure to coal at 25.90% of total volumes, with Norfolk Southern close behind at 24.48%. Since CSX saw volume drop by 18%, and Norfolk saw volume decline by 23%, it’s no surprise that these companies have trouble competing with Union Pacific.

Still The Best
This is truly a one horse race. Union Pacific leads their competition in revenue and EPS growth, operating cash flow growth, payout ratio, balance sheet, and coal performance. In addition, the company has the highest expected EPS growth over the next few years. In fact, with the stock trading for a forward multiple nearly equal to its 14.43% expected growth rate, I would argue this is the best stock in the industry bar none. The company doesn’t pay quite the yield of CSX or Union Pacific, but their low payout ratio has the potential to change that over time. In some industries, you might pick between two or three leaders, in the railroad industry, there is only one Union Pacific.

The article 5 Reasons There Is Only One Choice In This Industry originally appeared on Fool.com and is written by Chad Henage.

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