Norfolk Southern Corp. (NSC), Canadian Pacific Railway Limited (USA) (CP), Canadian National Railway (USA) (CNI): 3 Railroads That Could Continue To Outperform

Besides that, Canadian Pacific posted a record quarter with a net income of $213.6 million. As a result of this continued impressive performance, shares of Canadian Pacific have more than doubled over the last three years, and have outperformed the entire railroad industry. And analysts estimate that its annual EPS could still grow by 23.3% for the next 5 years.

Company #3

Even Canadian National Railway (USA) (NYSE:CNI) has been reporting stellar financial growth. Over a 5 year period its net income has risen by over 20%, while its shares more than doubled in value. The company continues to benefit from its significantly higher gross margins of 49%, as compared to the industry average of 27% (which have fattened by 21.7% over the past 5 years).

The company will be launching a terminal for intermodal transportation at its Joliet yard in Illinois this month. The terminal would be spread across 30 acres of land, which can accommodate up to 175 trucks and eventually allow better connectivity to the Asian markets.

Its worth mentioning that Canadian National Railway (USA) (NYSE:CNI) is the largest railroads company in Canada. During FY12, the company generated $9.85 billion in total revenue, while its intermodal segment contributed around $1.99 billion. Its business divisions are extensive and mature, which is why its hard for Canadian National to report radical growth like Norfolk Southern.

However, its geographic diversification also results in better efficiency (higher margins) and adds stability to its top line. According to analyst consensus, Canadian National’s annual EPS could grow by 12.9% for the next 5 years. Additionally, analysts at BMO Capital estimate that its shares could appreciate by around 10%.

Final words

All three companies are very different from each other and offer myriad growth prospects. In order take advantage of the recovering industrial sectors (domestic and abroad), creating a portfolio all the mentioned companies would be a great way to spread the risks and rewards.

Piyush Arora has no position in any stocks mentioned. The Motley Fool recommends Canadian National Railway.

The article 3 Railroads That Could Continue To Outperform originally appeared on

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.