Railroad stocks are often overlooked as they are relatively plain investments in an industry that might eventually be phased out. However, most industry experts insist rail service will be in use for the foreseeable future. Invest in the right rail stocks, and you could make money while diversifying your portfolio.
Though rail companies are rarely featured on CNBC and other investing media, plenty rake in the cash year after year. Part of the appeal of investing in rail stocks is the fact that there is less risk. Though the rails don't have as high of a ceiling as some other stocks, these companies have proven their business models work.
Let's shift our attention to two specific rail stocks every investor should consider adding to their portfolio. Those two companies are CSX (CSX) and Norfolk Southern (NSC). But which is a better buy?
CSX (CSX)
CSX is one of the country's top transportation businesses. Headquartered in sunny Jacksonville, CSX railroad cars will likely cross a railroad track near you at some point today. The company provides freight transportation services, including the transportation of intermodal containers along with trailers.
CSX has an overall grade of B, which translates into a Buy rating in our POWR Rating system. CSX has a grade of B in the Momentum, Quality, and Sentiment component grades. Investors who would like to find out how CSX fares in the Value, Growth, and Stability components can do so by clicking here.
Of the 17 stocks in the Railroads industry, CSX is ranked third. Click here to find other top stocks in this industry. Analysts have high hopes for CSX, setting an average target price of $35.68 for the stock. If CSX hits this price level, it will have popped by more than 12%. Out of the analysts that cover the stock, eleven rate it Buy and seven rate it a Strong Buy.
Norfolk Southern (NSC)
NSC controls one of the country's major freight railroads. NSC provides rail transportation of raw materials, finished goods, and additional products throughout the majority of the country, except the northern region. NSC also drives revenue through logistics services. No other rail has a more extensive intermodal network along the eastern side of the country.
NSC has a forward P/E ratio of 23.01. This ratio indicates NSC might be a bit overpriced. NSC has a beta of 1.30, which means that it is more volatile than the market. NSC has an overall grade of C and a Neutral rating in our POWR Ratings system. The stock has a C grade in the Value, Sentiment, and Stability components. You can find out how NSC fares in the rest of the components, such as Growth, Momentum, and Quality, by clicking here.
Of the 17 publicly traded companies in the Railroads space, NSC is ranked fourth overall.
Which is the Better Buy?
CSX is more deserving of your investing dollars than NSC. CSX has a better overall grade in the POWR Ratings and better component grades. CSX is also ranked higher in the Railroad industry. It's best to wait for NSC's overall rating to reach a Buy or Strong Buy before considering investing.
CSX shares were unchanged in premarket trading Thursday. Year-to-date, CSX has gained 5.90%, versus a 18.36% rise in the benchmark S&P 500 index during the same period.
About the Author: Patrick Ryan
Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management.
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