CSX Corporation (CSX) Will Soar in the Recovering Economy: Union Pacific Corporation (UNP), Norfolk Southern Corp. (NSC)

Burlington Northern Santa Fe (BNSF) is the second largest railroad, and is wholly owned by Berkshire Hathaway Inc. (NYSE:BRK.A). BNSF is headquartered in Texas and operates in the western two-thirds of the United States.

At just 12 times forward earnings, I think that CSX Corporation (NYSE:CSX) is a bargain right now. The consensus projected 11% forward earnings growth. For comparison, Norfolk Southern trades at 13.1 times forward earnings, with just 7% growth projected. Union Pacific trades at a higher valuation of 15.1 times forward earnings, however they are projected to grow at 14% going forward. It is also worth noting that Union Pacific Corporation (NYSE:UNP) is the only major railroad with an “A” credit rating, having lower debt levels relative to their size than the other two.

While any of these railroads look like decent investments, the cheap valuation of CSX Corporation (NYSE:CSX) and their growth potential, combined with their good dividend history and buybacks makes it the most attractive of the bunch for long term-investors.

Having said that, if you don’t insist on owning an individual railroad, Berkshire may in fact be the best way to gain exposure to the sector in your portfolio. Although it trades at a lofty 19.5 times forward earnings and pays no dividend (which admittedly will turn a lot of investors off), there is no company with a better history of creating long-term value for its shareholders. Currently, analysts are projecting a 13% forward growth rate for the company, which given the current economic recovery, I find to be a bit conservative. However you decide to play it, the railroad industry will be one of the big winners of the continued economic growth and your portfolio deserves some exposure to it!

The article This Industry Will Soar in the Recovering Economy originally appeared on Fool.com and is written by Matthew Frankel.

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