11 Best Railroad Stocks To Buy Now

In this article, we discuss 11 best railroad stocks to buy now.

In 2022, the global railroad market was worth $307.6 billion. According to IMARC Group’s projections, the market is anticipated to reach $503.3 billion by 2028, indicating a compound annual growth rate (CAGR) of 4.11% during the forecast period from 2023 to 2028. Since global transportation demand is increasing rapidly, the International Energy Agency predicts that passenger and freight activity will double the current levels by 2050. While this is a sign of economic prosperity, it goes hand in hand with higher emissions and atmospheric damage. High speed railways are a perfect solution for a swiftly urbanizing world, as rail is considered one of the most energy efficient means of transport. 

Currently, about 75% of passengers use electric trains, compared to about 60% of the passengers boarding these energy efficient trains in 2000. As a result of this heavy reliance on electricity, the rail sector is the most diverse mode of transport in terms of energy sources. Europe, Japan, and Russia have the highest number of electric trains, while North and South America are largely reliant on diesel. Over the past two decades, there has been a consistent increase in freight rail activity. Currently, the movement of freight by rail is primarily concentrated in China and the United States, with each country accounting for about one-quarter of global rail freight activity. Additionally, Russia holds a prominent share, making up one-fifth of the global freight movement. The transportation of minerals, coal, and agricultural products constitutes the majority of freight rail activity worldwide.

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The trade trends from CNBC Supply Chain Heat Map data have consistently demonstrated a decline in inbound freight over the last few months. This reduction in freight has had a negative impact on the earnings of both trucking and rail industries, as their revenue depends on the transportation of goods. According to United Parcel Service, Inc. (NYSE:UPS) CEO Carol Tome, a downturn in US retail sales and persistently weak demand in Asia contributed to lower-than-expected freight volume for the company. Similarly, Shelley Simpson, the president of J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT), recently characterized the current state of the industry as a “freight recession.” During the Q1 earnings call of Union Pacific Corporation (NYSE:UNP), CEO Lance Fritz identified inflation, elevated inventory levels, and sluggish consumer spending as immediate challenges in the industry. On the other hand, CSX Corporation (NASDAQ:CSX) surpassed earnings expectations as it experienced a surge in merchandise freight and coal transportation volumes. Similarly, Norfolk Southern Corporation (NYSE:NSC) also reported robust performance in merchandise and coal sectors. 

While the railroad and freight industry is experiencing mixed performance, its significance as a lucrative part of the economy cannot be overlooked. Some of the best stocks to buy in the railroad sector include Norfolk Southern Corporation (NYSE:NSC), Canadian Pacific Kansas City Limited (NYSE:CP), and CSX Corporation (NASDAQ:CSX). 

Our Methodology 

We selected the following railroad stocks based on the hedge fund sentiment toward each stock. We have assessed the hedge fund sentiment from Insider Monkey’s database of 943 elite hedge funds tracked as of the end of the first quarter of 2023. The list is arranged in ascending order of the number of hedge fund holders in each firm. 

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Best Railroad Stocks To Buy Now

11. FreightCar America, Inc. (NASDAQ:RAIL)

Number of Hedge Fund Holders: 3

FreightCar America, Inc. (NASDAQ:RAIL) designs, develops, and sells railcars and railcar components for the transportation of bulk commodities and freight products in North America. On May 9, FreightCar America, Inc. (NASDAQ:RAIL) reported a Q1 non-GAAP EPS of -$0.21, beating market estimates by $0.02. However, the revenue of $81 million missed Wall Street consensus by $17.9 million. The company also agreed to issue non-convertible preferred stock with a financial partner to lower debt and provide additional growth capital. 

According to Insider Monkey’s first quarter database, Ken Griffin’s Citadel Investment Group, Minerva Advisors, and Jim Simons’ Renaissance Technologies were bullish on the stock. 

In addition to Norfolk Southern Corporation (NYSE:NSC), Canadian Pacific Kansas City Limited (NYSE:CP), and CSX Corporation (NASDAQ:CSX), FreightCar America, Inc. (NASDAQ:RAIL) is one of the best railroad stocks to invest in. 

10. L.B. Foster Company (NASDAQ:FSTR)

Number of Hedge Fund Holders: 10

L.B. Foster Company (NASDAQ:FSTR)’s Rail, Technologies, and Services segment is involved in various aspects of the rail industry. L.B. Foster Company (NASDAQ:FSTR) provides new rail to passenger and short line freight railroads, industrial companies, and rail contractors. This segment also specializes in friction management products and application systems, railroad condition monitoring systems and equipment, wheel impact load detection systems, wayside data collection and management systems, track fasteners, and engineered concrete railroad ties. It is one of the best railroad stocks to invest in. 

On May 9, L.B. Foster Company (NASDAQ:FSTR) reported a Q1 GAAP EPS of -$0.20, falling short of Wall Street consensus by $0.01. The revenue of $115.49 million climbed 16.9% on a year-over-year basis, beating market estimates by $2.58 million. 

According to Insider Monkey’s first quarter database, 10 hedge funds were bullish on L.B. Foster Company (NASDAQ:FSTR), with combined stakes worth $24 million. Mario Gabelli’s GAMCO Investors is the largest position holder in the company. 

Here is what Sterling Partners Equity Advisors has to say about L.B. Foster Company (NASDAQ:FSTR) in its Q4 2021 investor letter:

“L.B. Foster is a manufacturer and distributor of transportation and energy infrastructure products and services with locations in North America and Europe. This has been a very long-term holding on the thesis of a growing share of rail and pipelines in transportation and FSTR’s low-cost manufacturer role in the supply chain. During the quarter, management reported increased Q2 revenues substantially driven by strength in the rail, precast concrete products, and fabricated steel markets. Backlog increased by 12.4% compared to the prior year quarter driven by the significant increase in the infrastructure solutions segment.”

9. GATX Corporation (NYSE:GATX)

Number of Hedge Fund Holders: 12

GATX Corporation (NYSE:GATX) operates as a railcar leasing company in the United States, Canada, Mexico, Europe, and India. The company is divided into three segments – Rail North America, Rail International, and Portfolio Management. It is one of the best railroad stocks to watch. 

On April 25, GATX Corporation (NYSE:GATX) reported a Q1 non-GAAP EPS of $2.20 and a revenue of $338.9 million, outperforming Wall Street estimates by $0.49 and $10.7 million, respectively. The company also distributed a quarterly dividend of $0.55 per share to shareholders on June 30. 

According to Insider Monkey’s first quarter database, 12 hedge funds were bullish on GATX Corporation (NYSE:GATX), compared to 13 funds in the prior quarter. Alexander Mitchell’s Scopus Asset Management is a prominent stakeholder of the company, with 177,248 shares worth $19.50 million. 

8. The Greenbrier Companies, Inc. (NYSE:GBX)

Number of Hedge Fund Holders: 12

The Greenbrier Companies, Inc. (NYSE:GBX) designs, manufactures, and commercializes railroad freight car equipment in North America, Europe, and South America. The company’s operations are divided into three segments – Manufacturing, Maintenance Services, and Leasing & Management Services. It is one of the best railroad stocks to monitor. On June 29, The Greenbrier Companies, Inc. (NYSE:GBX) reported an FQ3 non-GAAP EPS of $1.02 and a revenue of $1.04 billion, outperforming Wall Street estimates by $0.44 and $135.06 million, respectively. 

On June 29, The Greenbrier Companies, Inc. (NYSE:GBX) declared a $0.30 per share quarterly dividend, an 11.1% increase from its prior dividend of $0.27. The dividend is payable on August 8, to shareholders of record on July 18. 

According to Insider Monkey’s first quarter database, 12 hedge funds were bullish on The Greenbrier Companies, Inc. (NYSE:GBX), compared to 14 funds in the last quarter. Ryan Tolkin’s Schonfeld Strategic Advisors is the biggest stakeholder of the company, with 408,561 shares worth $13 million. 

White Brook Capital made the following comment about The Greenbrier Companies, Inc. (NYSE:GBX) in its Q1 2023 investor letter:

“The Greenbrier Companies, Inc. (NYSE:GBX): Greenbrier positively preannounced its quarter in the waning days of March, but the stock, after an initially positive reaction, did not have a sustained positive response. The unveiling of its full quarterly report and subsequent first-ever-investor day during the second week of April has undone many of the concerns raised after the previous report and supports the view that it is successfully addressing its operational problems. Demand is also strong. While the stock rallied on the strong full results, it has since sold off –back to the levels of its problematic release in early January –and is as undervalued as we previously related, but with less risk than previously thought. I continue to believe the stock is significantly undervalued.”

7. Trinity Industries, Inc. (NYSE:TRN)

Number of Hedge Fund Holders: 13

Trinity Industries, Inc. (NYSE:TRN) offers rail transportation products and services under the TrinityRail brand in North America. On May 9, Trinity Industries, Inc. (NYSE:TRN) declared a $0.26 per share quarterly dividend, in line with previous. The dividend is payable on July 31, to shareholders of record as of July 14. It is one of the best railroad stocks to buy now. 

On June 26, Trinity Industries, Inc. (NYSE:TRN) announced that it plans to issue senior notes maturing in 2028, with a total principal amount of $400 million. The company intends to utilize the funds obtained from the offering to repay its existing debts under the corporate revolving credit facility and for general corporate needs. This may include paying off other debts, such as the 4.55% senior notes due in 2024.

According to Insider Monkey’s first quarter database, 13 hedge funds were long Trinity Industries, Inc. (NYSE:TRN), compared to 11 funds in the earlier quarter. Chuck Royce’s Royce & Associates is a significant position holder in the company, with 429,542 shares worth $10.4 million. 

6. Canadian National Railway Company (NYSE:CNI)

Number of Hedge Fund Holders: 39

Canadian National Railway Company (NYSE:CNI) is a major player in the rail and transportation industry. It operates various services related to rail transportation, including equipment provision, customs brokerage, transloading and distribution, business development, real estate, and private car storage services. On April 24, Canadian National Railway Company (NYSE:CNI) reported a Q1 non-GAAP EPS of C$1.82 and a revenue of C$4.31 billion, topping Wall Street estimates by C$0.10 and C$60 million, respectively. 

According to Insider Monkey’s first quarter database, 39 hedge funds were bullish on Canadian National Railway Company (NYSE:CNI), compared to 41 funds in the earlier quarter. Bill & Melinda Gates Foundation Trust is the biggest position holder in the company, with 54.8 million shares worth $6.46 billion. 

Like Norfolk Southern Corporation (NYSE:NSC), Canadian Pacific Kansas City Limited (NYSE:CP), and CSX Corporation (NASDAQ:CSX), Canadian National Railway Company (NYSE:CNI) is one of the best railroad stocks to monitor.

5. Canadian Pacific Kansas City Limited (NYSE:CP)

Number of Hedge Fund Holders: 48

Canadian Pacific Kansas City Limited (NYSE:CP) owns and manages a transcontinental freight railway in Canada and the United States, transporting bulk commodities and merchandise freight. It is one of the best railroad stocks to buy now. On April 26, Canadian Pacific Kansas City Limited (NYSE:CP) declared a C$0.19 per share quarterly dividend, in line with previous. The dividend is distributable on July 31, to shareholders of record as of June 30. 

According to Insider Monkey’s first quarter database, 48 hedge funds were bullish on Canadian Pacific Kansas City Limited (NYSE:CP), compared to 49 funds in the earlier quarter. Chris Hohn’s TCI Fund Management is the biggest stakeholder of the company, with 55.8 million shares worth $4.3 billion. 

Artisan Focus Fund made the following comment about Canadian Pacific Kansas City Limited (NYSE:CP) in its first quarter 2023 investor letter:

“We’ve held a large position in Canadian Pacific Kansas City Limited (NYSE:CP) for more than a year. During the quarter, Canadian Pacific completed the acquisition of the Kansas City Southern Railroad. This outcome, to us, was a best case scenario. Despite considerable fears leading up to the close, the transaction resulted in no divestitures, concessions or track usage/interchange limitations in any key regions. This was exciting, and we see a very compelling setup for the next two years. Canadian Pacific has a best-in-class management team, now running the only truly end-to-end railroad network that can stretch across the high growth west coast Canadian ports down into lower Mexico. We think both areas are key beneficiaries of our De-Globalization theme. While the merits of the deal are slowly becoming apparent, we still think the scope of the upside is underappreciated. We expect accelerating growth from here in the form of new customer acquisition and share gains by existing customers. The deal itself is particularly unique as our analysis points to essentially no cannibalization or overlapping of existing routes.”

4. Norfolk Southern Corporation (NYSE:NSC)

Number of Hedge Fund Holders: 51

Norfolk Southern Corporation (NYSE:NSC) was incorporated in 1980 and is headquartered in Atlanta, Georgia. The company specializes in the rail transportation of raw materials, intermediate goods, and finished products in the United States. It is one of the top railroad stocks to invest in. On April 26, Norfolk Southern Corporation (NYSE:NSC) reported a Q1 non-GAAP EPS of $3.32, beating market consensus by $0.17. While the revenue of $3.1 billion increased 6.9% year-over-year, it fell short of Wall Street estimates by $10 million. 

According to Insider Monkey’s first quarter database, 51 hedge funds were bullish on Norfolk Southern Corporation (NYSE:NSC), compared to 43 funds in the prior quarter. Ken Griffin’s Citadel Investment Group is the biggest stakeholder of the company, with 1.65 million shares worth approximately $352 million. 

The London Company Large Cap Strategy made the following comment about Norfolk Southern Corporation (NYSE:NSC) in its first quarter 2023 investor letter:

“Norfolk Southern Corporation (NYSE:NSC) – NSC was a significant underperformer this quarter reflecting weaker than expected quarterly earnings and news of a train derailment in Ohio. Fortunately, there were no fatalities related to the derailment, but there was environmental damage. Historically, the financial impact from train derailments have been relatively small and NSC’s insurance coverage could help cushion the blow. We believe NSC will emerge from this relatively unscathed, but will have to reinforce some of their network due to changes made from precision scheduled railroading efforts.”

3. Westinghouse Air Brake Technologies Corporation (NYSE:WAB)

Number of Hedge Fund Holders: 52

Westinghouse Air Brake Technologies Corporation (NYSE:WAB) provides railway electronics, positive train control equipment, signal design and engineering services, and heat exchange and cooling systems. Its products and services are used in locomotives, regional and high speed trains, subway cars, light-rail vehicles, and buses. Westinghouse Air Brake Technologies Corporation (NYSE:WAB) is one of the best railroad stocks to monitor. 

On June 16, Westinghouse Air Brake Technologies Corporation (NYSE:WAB) announced its decision to purchase L&M Radiator, a manufacturer of heavy-duty equipment radiators and heat exchangers, for $230 million in cash. Westinghouse Air Brake Technologies Corporation (NYSE:WAB) aims to expand its installed base and recurring revenue in the mining, engine cooling, and heat transfer sectors through this acquisition. The company anticipates that L&M Radiator will contribute positively to its earnings per share, excluding transaction costs, and expects to achieve significant synergies within the next three years.

According to Insider Monkey’s first quarter database, 52 hedge funds were bullish on Westinghouse Air Brake Technologies Corporation (NYSE:WAB), compared to 41 funds in the last quarter. Richard S. Pzena’s Pzena Investment Management is the largest stakeholder of the company, with 7.73 million shares worth $781.5 million. 

Here is what TGV Intrinsic Fund has to say about Westinghouse Air Brake Technologies Corporation (NYSE:WAB) in its Q2 2021 investor letter:

“The second change concerns the American railway supplier Westinghouse Air Brake Technologies (Wabtec). Wabtec took over the railway division from General Electric (GE) in 2019. As part of this, Rafael Santana – who had come over from GE – became the new CEO of Wabtec. The previous CEO, Ray Betler, is one of the best corporate leaders I know, and I particularly appreciated the decentralized corporate culture he embodied. The operating figures have developed nicely since 2019 under Rafael Santana. However, from conversations with current and former employees of Wabtec, it is becoming increasingly clear to me that the GE culture, which is designed to achieve short-term corporate goals, is establishing itself within the company. This culture is not necessarily bad – but it is a culture that does not fit the long-term orientation of the TGV Intrinsic.

Accordingly, I recommended the sale of all Wabtec shares despite the decent operational development. Wabtec is a good example of a distinction between “process” and “result”. In the long run, the right process typically leads to a good result and the wrong process to a bad one. In the short term, however, even a wrong process can lead to a good result. Considered by itself, Wabtec’s financial development since 2019 (result) is not sufficient to make an investment recommendation for the future. Changes in the corporate culture (process) often only become noticeable in the financial figures after several years and are therefore a more meaningful indicator of long-term operational development than short-term historical business development. Accordingly, my discussions with current and former Wabtec employees about changes in the corporate culture are the crucial reason for the sell recommendation, as I assume that the GE culture will lead to worse operating results in the long term.”

2. CSX Corporation (NASDAQ:CSX)

Number of Hedge Fund Holders: 61

CSX Corporation (NASDAQ:CSX) provides rail services, transportation of intermodal containers and trailers, rail-to-truck transfers, and bulk commodity operations. On April 20, CSX Corporation (NASDAQ:CSX) announced a Q1 GAAP EPS of $0.48 and a revenue of $3.71 billion, outperforming Wall Street estimates by $0.05 and $130 million, respectively. It is one of the best railroad stocks to watch.

According to Insider Monkey’s first quarter database, 61 hedge funds were bullish on CSX Corporation (NASDAQ:CSX), compared to 66 funds in the earlier quarter. Eric W. Mandelblatt’s Soroban Capital Partners is the largest stakeholder of the company, with 52.6 million shares worth $1.57 billion. 

Here is what ClearBridge Investments Global Infrastructure Value Strategy has to say about CSX Corporation (NYSE:CSX) in its Q4 2021 investor letter:

“On a regional basis, the U.S. and Canada were the top contributors to quarterly performance, of which U.S. rail operator CSX was among the lead performers. CSX is one of five leading North American rail companies, with over 21,000 miles of rail, covering 23 states and 40+ ports. CSX is engaged in the transportation of rail freight in the Southeast, East, and Midwest via interchange with other rail carriers, to and from the rest of the U.S. and Canada. CSX performed well during the quarter after the company beat market expectations on its third-quarter results. The beats were largely driven by strong pricing, which could be hitting record highs, and healthy commodity/coal volume driven by the current energy crisis.”

1. Union Pacific Corporation (NYSE:UNP)

Number of Hedge Fund Holders: 85

Union Pacific Corporation (NYSE:UNP) is a railroad company in the United States, providing transportation services for grain products, fertilizers, food and refrigerated products, coal, petroleum, construction products, industrial chemicals, plastics, forest products, and automobiles. Union Pacific Corporation (NYSE:UNP) is one of the best railroad stocks to invest in. 

Union Pacific Corporation (NYSE:UNP) achieved better-than-expected financial results in the first quarter of 2023. Despite a minor setback in terms of efficiency, the company reported earnings per share of $2.67, surpassing the Street consensus of $2.57. Additionally, Union Pacific Corporation (NYSE:UNP)’s revenue of $6.06 billion exceeded market expectations and increased 3.4% year-over-year.  

According to Insider Monkey’s first quarter database, 85 hedge funds were long Union Pacific Corporation (NYSE:UNP), compared to 83 funds in the earlier quarter. John Overdeck and David Siegel’s Two Sigma Advisors is a prominent stakeholder of the company, with 2.15 million shares worth $433.7 million. 

Matrix Asset Advisors made the following comment about Union Pacific Corporation (NYSE:UNP) in its Q1 2023 investor letter:

“During the quarter we added a new position in Union Pacific Corporation (NYSE:UNP). Union Pacific (UNP) is the 2nd largest railroad network in the United States just behind Burlington Northern Santa Fe. The firm operates in the Western, Midwestern, and Southern portions of the United States. 90% of UNP sales come from the US and 10% from Mexico. Over the past decade, railroads gained market share from the trucking industry because it costs 10-40% less to ship via rails than trucks. The company has a long history of consistent operating growth and profitability. The shares fell from a high of $278 in May of 2022 after the firm experienced operating challenges due to a slower macro environment and higher expenses.”

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Disclosure: None. 11 Best Railroad Stocks To Buy Now is originally published on Insider Monkey.