Railroad companies have been relied upon to support growing trade and to move goods across large distances of land efficiently. Additionally, railroad companies enjoy significant barriers to entry given the difficulty, both financially and physically, of building up a new railroad network in North America. On December 15th of last year, I published an article titled, "2 Cheap Railroad Stocks To Buy For 2013" which outlined CSX (CSX) and Norfolk Southern (NSC) as investment ideas for 2013 given their relative cheapness, good dividend yields and strong competitive advantages. For 2014, in addition to CSX and Norfolk Southern, I believe that Union Pacific (UNP) will also have a good year given profitability trends and valuation, especially relative to earnings growth.
The current earnings multiples for Union Pacific, Norfolk Southern and CSX support the notion that there may still be further upside for the shares in these companies based upon historical ratios. While railroad stocks have performed well this year, CSX, Norfolk Southern and Union Pacific are strongly positioned to perform well in 2014 given earnings trends and a potential expansion of earnings multiples.
Source: Seeking Alpha
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