Top Railroad Stocks to Watch in 2023 with Prices and Growth Insights

Greenbrier, Central Japan Railway, and Canadian Pacific stand out as leaders in railroad revenue growth for 2023

Despite concerns about potential rail strikes in the U.S. and economic downturn risks, Greenbrier Companies, Central Japan Railway, and Canadian Pacific Railway are outperforming their peers with notable revenue growth.

The iShares U.S. Transportation Average ETF (IYT), a key benchmark for railroad, freight, and airline stocks, has declined 6% over the past year, compared to a 4% drop in the Russell 1000 Index.

Below, we analyze the top railroad stocks as of mid-2023, categorized by best value, fastest growth, and strongest momentum.

Best Value Railroad Stocks in 2023

These railroad stocks offer the lowest trailing 12-month price-to-earnings (P/E) ratios, indicating investors pay less for each dollar of earnings — a key metric for value-focused investors.

Source: YCharts

• Norfolk Southern Corp.: Operating freight routes in the eastern U.S., Norfolk Southern faced setbacks after a hazardous materials train derailment in East Palestine, Ohio, leading to lawsuits and an 18% stock decline since the incident.
• CSX Corp.: Providing rail and intermodal services across diverse markets, CSX recently appointed Joseph Hinrichs as CEO and secured union agreements offering paid sick leave, reducing strike risks.
• Union Pacific Corp.: Connecting the western U.S. and key ports, Union Pacific signed a $1 billion deal with Wabtec to modernize 600 locomotives, enhancing operational efficiency.

Fastest Growing Railroad Stocks of 2023

Ranked by a balanced growth model combining year-over-year quarterly revenue and earnings-per-share (EPS) increases, these companies demonstrate robust business expansion.

Source: YCharts

• Greenbrier Companies Inc.: A global supplier of freight railcars, marine barges, and railcar maintenance services, Greenbrier continues to expand its footprint in freight transportation.
• Central Japan Railway Co.: Operating key passenger rail lines between major cities like Tokyo and Osaka, this company remains a pivotal player in Japan’s transport sector.
• Canadian Pacific Railway Ltd.: Offering extensive rail and intermodal services across Canada and the U.S., Canadian Pacific maintains consistent dividends and steady growth.

Railroad Stocks With Strongest Momentum in 2023

These stocks delivered the highest total returns over the past 12 months, reflecting strong investor confidence and market performance.

Source: YCharts

• Alstom S.A.: The French rail transport leader manufactures high-speed trains and provides infrastructure services including digital mobility and signaling.
• Westinghouse Air Brake Technologies Corp. (Wabtec): Supplying freight and transit rail equipment, Wabtec reported a 13% net income increase in Q4 2022 and invested $473 million in share repurchases.
• West Japan Railway Co.: Operating passenger rail lines and retail properties in the Osaka region, West Japan Railway benefits from diversified revenue streams.

Key Factors When Evaluating Railroad Stocks

Consider a company’s operating ratio—the proportion of operating expenses to revenue—as a critical efficiency measure. Lower ratios suggest better cost control. Also evaluate train speeds and terminal car dwell times; shorter idle times indicate efficient operations.

Additionally, assess competition from trucking and other transport sectors, which can impact railroad profitability.

Risks to Consider in Railroad Investments

Railroad stocks may experience volatility during economic slowdowns or sector-specific challenges. For example, companies specializing in transporting commodities like timber, coal, or oil can be affected by supply shortages or regulatory changes.

Political factors, such as legislation affecting oil and gas industries, can indirectly impact railroads serving those sectors. Investors should monitor these external influences carefully.

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