Other players
Union Pacific Corporation (NYSE:UNP) links 23 states in the western U.S. by rail. It recently posted second-quarter results and saw growth in earnings and revenue. Going forward, there are a few factors that should act as tailwinds for the company.
As Valero‘s crude-by-rail project awaits approval, Union Pacific Corporation (NYSE:UNP) is already making the necessary moves of beefing up its tracks; these improvements began in June of this year. This is just a small part of a mammoth $3.6 billion initiative spread across 23 states with the aim of improving network efficiency, adding new business avenues, and enhancing safety, reliability and productivity.
With the increase in natural gas prices, utility companies are switching over to coal; this is also enabling Union Pacific Corporation (NYSE:UNP) to increase coal carloads. Coal shipment grew 12% year-over-year in the second quarter, and as the demand for coal increases (as shown in graph below), this is bound to benefit the company.
Kansas City Southern (NYSE:KSU) also recently reported its second-quarter results. Its revenue increased 6% from the same quarter a year ago to $579.3 million. This was helped primarily by a 3% increase in carloads and significant improvements in the company’s energy segment. Adjusted earnings also increased by around 9% from the year-ago quarter to $0.96 per share. This increase was driven by favorable rail industry pricing and volume improvement.
The recovery in the housing sector should also help the company as forest products make up 46% of its industrial and consumer products division. Kansas City Southern (NYSE:KSU) also expects a growth in crude-by-rail to Texas and remains committed to building a new crude terminal in Port Arthur; once completed, the terminal will enable its crude-by-rail business to grow in the future.
Kansas City Southern (NYSE:KSU) is estimated to see a 48% growth in sales through 2016. This beats peer for whom estimates are available, according to data compiled by Bloomberg. The increase is facilitated by the company’s operations in Mexico, where the economy is growing almost twice as fast as in the U.S.
Conclusion
CSX has been chugging along nicely and enjoying higher pricing, just like the rest of the railroad sector. But unlike the other companies discussed in this article, it has 2.4% dividend yield, while Union Pacific Corporation (NYSE:UNP) has a 2% yield and Kansas City Southern (NYSE:KSU) has an almost negligible of 0.80%. Investors looking for decent dividend income and stable price appreciation should consider CSX as an investment.
The article This Railroad Company Is Chugging Along Nicely originally appeared on Fool.com and is written by ANUP SINGH.
ANUP SINGH has no position in any stocks mentioned. The Motley Fool owns shares of CSX.
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