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CSX Corp. ( CSX - Analyst Report ) , one of the leading North American railroads, has begun operations on New England's first double-stack cleared intermodal route between N.Y. and Worcester, Mass. The new service is expected to reduce transit time by almost a day and benefit customers in central New England.
Given the growing importance of rail intermodal, rail infrastructural development has been at the focus of all investments undertaken by the railroads. In 2012, another major railroad, Norfolk Southern Corporation ( NSC - Analyst Report ) sought expansion plans worth $2 billion within its territory.
Norfolk’s expansion strategies were fueled mostly by the development of the energy sector, including the gas exploration projects in Marcellus and Utica shale plays as well as ventures associated with coal and power generation. Over the coming years, it plans to introduce 32 energy-related projects in 14 states under it service areas.
Coming back to the recent development, besides CSX, rail freight carriers like Canadian National Railway Company ( CNI - Analyst Report ) and Canadian Pacific Railway Limited ( CP - Analyst Report ) have also shown significant activities in terms of terminal and capacity developments. While Canadian National collaborated with Indiana Rail Road Company to set up an intermodal terminal in Indianapolis, Canadian Pacific started operations in its latest intermodal terminal at Saskatchewan's Global Transportation Hub in Regina.
All these recent events only lead to the fact that railroads are experiencing increased growth in their intermodal services. We expect all these investments to remain accretive over the long term, supporting volume growth. However, given the current economic backdrop, these investments can likely weigh on the margins in the foreseeable future until there is a significant improvement in the market fundamentals that will drive revenues upward.
Currently, CSX Corporation has Zacks Rank #5 (Strong Sell) rating. Other railroad stocks –Norfolk Southern, Canadian National and Canadian Pacific – retain a Zacks Rank #3 (Hold).
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