In this article we discuss the 5 best railroad stocks to buy in 2021. If you want to read our detailed analysis of the railroad industry, go directly to the 10 Best Railroad Stocks to Buy in 2021.
Best Railroad Stocks to Buy in 2021
5. Canadian Pacific Railway Limited (NYSE: CP)
Market Cap: $52.588 billion
Number of Hedge Fund Holders: 24
Canadian Pacific Railway Limited (NYSE: CP) operates a transcontinental freight railway in Canada and the United States. The company provides rail and intermodal transportation services through a rail network of 13,000 miles expanding across several business centers in British Columbia, Quebec, and the Northeast and Midwest regions of the US. Canadian Pacific Railway Limited was founded in 1881 and is headquartered in Calgary, Canada. With a market cap of $52.588 billion, Canadian Pacific Railway Limited (NYSE: CP) has earned the 5th spot in Insider Monkey’s 10 best railroad stocks to buy in 2021 list.
In the earnings report for the first quarter of 2021, CP reported a revenue of $1.96 billion with a diluted EPS of $4.50 which is a 51% increase from $2.98 in the preceding year. Reported OR increased by 100 basis points from 59.2% in Q1 of 2020 to 60.2% in Q1 of 2021. This strong momentum in the beginning of fiscal year 2021 presents unique opportunities for CP as demand recovers from the COVID-19 pandemic. The full year outlook is mostly positive with an estimated double-digit diluted EPS growth and capital expenditures of $1.55 billion.
4. Norfolk Southern Corporation (NYSE: NSC)
Market Cap: $70.833 billion
Number of Hedge Fund Holders: 44
Norfolk Southern Corporation (NYSE: NSC) is a Virginia-based company that is involved in the transportation of raw materials, intermediate products, and finished goods by rail within the United States. It also transports overseas freight through Atlantic and Gulf Coast ports as well as commuter passenger services. As of December 31, 2020, the company operated approximately 19,300 route miles in 22 states and the District of Columbia. Norfolk Southern Corporation (NYSE: NSC) expected earnings growth year for fiscal year 2021 is 19.7% which makes it an ideal choice for investment.
Recently, NSC closed a $500 million green bond offering to fund investments in order to reduce the company’s carbon emissions and help customers reduce their supply chain emissions. Norfolk Southern is the first Class I railroad in North America to issue green bonds earning it a top spot in the 10 best railroad stocks to buy in 2021. Over the past four quarters, the company has surpassed consensus EPS estimates four times. Its first quarter earnings in 2021 amounted to $2.66 per share as income from railway operations increased 7% year over year to $1.015 billion.
3. CSX Corporation (NASDAQ: CSX)
Market Cap: $76.906 billion
Number of Hedge Fund Holders: 58
CSX Corporation (NASDAQ: CSX) provides freight transportation via rail as well as rail-to-truck transfers and bulk commodity operations. The company also provides intermodal transportation services through a vast network of 30 terminals. CSX Corporation (NASDAQ: CSX) currently operates a rail network of 19,500 route miles. It was founded in 1978 and is based in Jacksonville, Florida.
The company recently announced that it has signed an agreement to acquire Quality Carriers, Inc. which is the largest provider of bulk liquid chemicals truck transportation in North America. CSX’s recent quarterly earnings report showed that the company’s earnings per share decreased 7% year-over-year to $0.93 in the first quarter of 2021. The total revenue in 2020 was reported to be $10.5 billion from $11.9 billion in 2019. Although the company’s revenue declined by 1%, CSX is expecting their profit for fiscal year 2021 to grow by 39% as the company has managed to increase their velocity by more than 30% and has created excess capacity to limit how long fluid trains sit idle. On May 7, 2021, the Board of Directors of CSX approved a $0.28 per share quarterly dividend on the company’s common stock which is payable on June 15, 2021. The future of the company seems bright with a higher cash flow on the cards for CSX making it one of the best railroad stocks to buy in 2021.
2. Canadian National Railway Company (NYSE: CNI)
Market Cap: $78.437 billion
Number of Hedge Fund Holders: 31
Canadian National Railway Company (NYSE: CNI) operates a network of 19,500 route miles of rail track spanning across the United States and Canada. It also operates vessels and docks, automotive logistics, transportation management services and freight forwarding services. The company was founded in 1919 and is headquartered in Montreal, Canada. Long term shareholders of Canadian National Railway Company (NYSE: CNI) have enjoyed a 79% share price increase over the past 5 years. It is the largest railroad company in Canada and has maintained its top position over the years making it one of the best railroad stocks to buy now. Despite reporting slightly weaker revenues in the first quarter of 2021, CNI is expecting strong growth for the whole year.
CN Rail earned $974 million or $1.37 per diluted share, down from $1.01 billion or $1.42 per share in the preceding year. Adjusted profits were reported to be $872 million or $1.23 per share, compared with $870 million or $1.22 per share in the first quarter of 2020 while revenue for the first quarter of 2021 totaled $3.54 billion. The company reported its recovery from a polar vortex in February with its terminal business up by 19%.
At the end of the fourth quarter of 2020, 31 hedge funds in the database of Insider Monkey held stakes worth $2.18 billion in CNI which is an increase from 26 hedge funds in the preceding quarter holding stakes worth $2.22 billion.
1. Union Pacific Corporation (NYSE: UNP)
Market Cap: $150.538 billion
Number of Hedge Fund Holders: 68
Union Pacific Corporation (NYSE: UNP) offers transportation services by railroad for agricultural products, coal and renewables, animal feeders, petroleum, industrial chemicals, metals and ores etc. As of 2020, its rail network included 32,313 route miles connecting Pacific Coast and Gulf Coast ports with the Midwest and eastern regions of the United States. The company was founded in 1862 and is headquartered in Omaha, Nebraska. The recent financial performance of Union Pacific Corporation (NYSE: UNP) despite the COVID-19 pandemic has been strong making it one of the 10 best railroad stocks to buy in 2021. The company’s CFO Jennifer Hamann is optimistic about UNP’s rail lines demand which is currently averaging around 157,000 7-day carloadings which has crossed the 160,000+ threshold in April. The company also announced the opening of a new intermodal terminal in Southern California which is an important import distribution region. Union Pacific Corporation (NYSE: UNP) reported a net income of $1.3 billion or $2.00 per diluted share in the first quarter of 2021 as compared to $1.5 billion or $2.15 per diluted share in 2020.
Vltava Fund, in their Q1 2021 investor letter, mentioned Union Pacific Corporation (NYSE: UNP). Here is what Vltava Fund has to say about Union Pacific Corporation in its letter:
“There was a slight change in Vltava Fund’s portfolio in the first quarter. We sold shares of Union Pacific. It was one of three stocks we bought a year ago at the market bottom. Although from a P/E viewpoint this was one of our most expensive purchases ever, the shares worked out quite well, and, when they were more than 90% higher at the beginning of this year, we decided to take profit and put the money into stocks with more attractive valuations.”
You can also take a peek at 10 Cheap Oil Stocks Under $10 and 10 Most Profitable Businesses in 2021.
