Zacks Industry Outlook Highlights Union Pacific, Canadian Pacific Kansas City and Norfolk Southern

For Immediate ReleaseChicago, IL – June 4, 2025 – Today, Zacks Equity Research discusses Union Pacific Corporation UNP, Canadian Pacific Kansas City Limited CP and Norfolk Southern Corporation NSC.Industry:  Transportation - RailLink to article: https://www.zacks.com/commentary/2483701/3-railroad-stocks-to-watch-from-the-prospering-industryThe Zacks Transportation - Rail industry faces challenges, ranging from tariff-induced economic uncertainties, inflationary pressures and resultant high interest rates to concerns pertaining to supply-chain disruptions.Despite the challenges surrounding the industry, Union Pacific Corporation, Canadian Pacific Kansas City Limited and Norfolk Southern Corporation appear better placed to tide over the challenges. Declining fuel costs represent a tailwind as far as bottom-line growth is concerned.Industry DescriptionThe Zacks Transportation - Rail industry includes railroad operators transporting freight (such as agricultural products, industrial products, coal, intermodal, automotive, consumer products, metals and minerals), primarily across North America. These companies focus on providing logistics and supply-chain expertise services. While freight constitutes a significant chunk of revenues, some of these companies also derive a small portion of their top line from other rail-related services, including third-party railcar and locomotive repairs, routine land sales and container sales, among others. A few companies offer service to multiple production and distribution facilities. Besides locomotives, some of these companies own equipment of leased locomotives, railcars etc.Factors Deciding the Industry's OutlookStrong Financial Returns for Shareholders: With economic activities gaining pace from the pandemic lows, more and more companies are allocating their increasing cash pile through dividends and buybacks to pacify long-suffering shareholders. This underlines their financial strength and confidence in the business. Among the Transportation – Railroad industry players, CSX Corporation CSX announced an 8.3% increase in the quarterly dividend in February 2025.Decline in Oil Price is a Tailwind: The decline in expenses on fuel represents another tailwind for the industry. Notably, oil prices declined almost 12% from the beginning of 2025 to date. As fuel expenses represent a key input cost for any transportation player, a fall in oil prices bodes well for the bottom-line growth of railroad stocks.Economic Uncertainty Remains: The current administration is focused on protectionism, which restricts international trade to help domestic industries. Tariff tensions are heating up, with new tariffs levied by the U.S. federal government, which has impacted the United States’ biggest trading partners — Canada, Mexico, and China. With retaliatory tariffs against the United States, trade tensions are escalating. These tariff-induced economic uncertainties do not bode well for industry participants. With inflation remaining a concern, risks associated with an economic slowdown and geopolitical tensions dampen the prospects of stocks belonging to this industrial cohort. Sluggish economic growth and inflationary woes are likely to make markets more volatile in the coming days. Rising economic uncertainty does not bode well for industry players.Zacks Industry Rank Indicates Encouraging ProspectsThe Zacks Transportation Railroad industry, housed within the broader Zacks Transportation sector, currently carries a Zacks Industry Rank #36. This rank places it in the top 15% of more than 250 Zacks industries.The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates dull near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.Before we present a few stocks that investors can consider, given their growth prospects, let’s take a look at the industry’s recent stock market performance and current valuation.Industry Lags S&P 500, Outperforms SectorThe Zacks Transportation - Rail industry has underperformed the Zacks S&P 500 Composite while outperforming the broader sector over the past year.Over this period, the industry has declined 2.4% compared with the S&P 500 Index’s northward movement of 11.8%. The broader sector has declined by 9.4%.Industry's Current ValuationBased on the trailing 12-month price-to-book (P/B), a commonly used multiple for valuing railroad stocks, the industry is currently trading at 5.97X compared with the S&P 500’s 7.99X. It is above the sector’s P/B ratio of 3.46X.Over the past five years, the industry has traded as high as 10.92X, as low as 5.28X and at the median of 7.32X.3 Stocks to Keep an Eye OnWe are presenting three Zacks Rank #3 (Hold) stocks that are well-positioned to grow in the near term. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Union Pacific: Headquartered in Omaha, NE, Union Pacific, through its subsidiary, Union Pacific Railroad Company, operates in the railroad business in the United States.Relatively stable ecommerce demand, cost-cutting efforts to boost the bottom line and consistent initiatives to reward its shareholders through dividend payments and share repurchases bode well for UNP’s prospects. Further, UNP has a stellar track record with respect to earnings surprises. The company surpassed the Zacks Consensus Estimate in two of the past four quarters (missed the mark in the remaining two quarters), with an average beat of 1.18%.Canadian Pacific: Headquartered in Calgary, Canada, Canadian Pacific manages a transcontinental freight railway in Canada, the United States and Mexico.We are encouraged by the Canadian Pacific’s decision to pay dividends consistently. Such a move instills investors’ confidence and positively impacts the company’s bottom line. Canadian Pacific has an encouraging track record with respect to earnings surprise. The company's earnings surpassed the Zacks Consensus Estimate in two of the past four quarters (met the mark in one quarter and missed the mark in the remaining quarter), delivering an average surprise of 2.11%.Norfolk Southern: Headquartered in Atlanta, GA, Norfolk Southern engages in the rail transportation of raw materials, intermediate products and finished goods in the United States.Ecommerce demand is supporting Norfolk Southern’s shipment volumes. The company utilizes the Precision Scheduled Railroading operating plan to reduce costs and enhance services for optimal asset utilization. We are impressed by Norfolk Southern’s efforts to reward its shareholders through dividends and buybacks.  Its strong free cash flow-generating ability supports its shareholder-friendly activities. NSC’s focus on improving service, safety, and productivity despite the challenges is commendable.  NSC has a solid track record with respect to earnings surprises. The company surpassed the Zacks Consensus Estimate in three of the past four quarters (missed the mark in the remaining quarter), with an average beat of 3.54%.Why Haven't You Looked at Zacks' Top Stocks?Since 2000, our top stock-picking strategies have blown away the S&P's +7.7% average gain per year. Amazingly, they soared with average gains of +48.4%, +50.2% and +56.7% per year.Today you can access their live picks without cost or obligation.See Stocks Free >>Media ContactZacks Investment Research800-767-3771 ext. 9339support@zacks.comhttps://www.zacks.comPast performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Union Pacific Corporation (UNP): Free Stock Analysis Report Norfolk Southern Corporation (NSC): Free Stock Analysis Report Canadian Pacific Kansas City Limited (CP): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks