Our quarterly North American Class I Freight Rail Performance report provides comparative operating and financial metrics for the continent's seven largest railroads: BNSF Railway (BNSF), Canadian National Railway (CN), Canadian Pacific Kansas City Ltd. (CPKC), CSX Transportation (CSX), Ferromex (FXE), Norfolk Southern Railway (NS), and Union Pacific Railroad (UP). All comparisons are for the current reporting quarter to the year-ago quarter (Q4 2024 to Q4 2023) unless otherwise stated.
Improved rail industry earnings in 2024
Revenue for Q4 2024 was generally flat or modestly declined compared to Q4 2023. Business was somewhat slow for both rail and trucking in 2023, which extended through 2024. Only CPKC and FXE showed increases in revenue in Q4 year-over-year, and both of these carriers serve the Mexican market. Looking across the past two years, only CPKC and FXE have shown compounded quarterly revenue growth.
The Canadian and Mexican railroads saw revenue per unit increases, while the US railroads did not, largely due to most of their growth being intermodal, which has lower revenue per unit compared to carload freight. CPKC’s increased revenues and revenue-per-unit were due mainly to longer single-line movements — a merger benefit.
Railroad earnings generally showed improvement in 2024 compared to prior post-pandemic years, the result of railroads improving service levels and trimming costs.
US West Coast intermodal rebounds
The US carriers and FXE saw unit volumes increases in Q4 2024 year-over-year, while CPKC, FXE, and NS increased revenue ton-miles. The NS increase largely reflects improved service levels. Intermodal traffic jumped by double-digits for UP and BNSF in Q4, reflecting a surge in international traffic through US West Coast ports. This was primarily due to the threat of labor disruptions at US East Coast and Gulf Coast ports and actual labor disruptions at Canadian West Coast ports. On the carload side, most of the Class I’s saw a modest increase in carload traffic, excluding coal. NS and CSX had the smallest declines in coal traffic, due to their larger share of metallurgical coal, both for domestic use and export.
Mixed operating metrics across railroads in Q4
Adjusted operating ratios declined at four of the seven railroads in Q4. UP posted an operating ratio under 60% both for Q4 and the full year, and its OR decreased even with an increase in employees. Both CPKC and UP reported their highest Q4 operating income in four years. The other railroads have not met or exceeded their 2022 post-pandemic rebound highs.
Capital expenditures for the full year 2024 increased modestly for most railroads, as expected in an inflationary year, except for BNSF and UP. Return on invested capital remained in the single digits for CPKC, due to the merger, and for NS, which is still recovering from the East Palestine accident.
Cash flow did not show the same convergence as operating income. CPKC, UP, BNSF, and FXE reported increases in cash flow, while CN, CSX, and NS reported declines. NS would have nearly doubled its cash flow, except for its purchase of its Cincinnati-Chattanooga mainline from the city of Cincinnati.
Railroad stock prices began to diverge from the S&P 500 index in 2024 and this divergence accelerated in the second half of the year. All of the public Class I’s are well below their year-end 2021 stock price, except CPKC, which is only slightly above this price.
Q4 rail service levels and safety focus
NS was the only railroad that managed to both reduce dwell time and increase average train speeds in Q4 year-over-year, while CSX reported both higher dwell and reduced train speeds. This suggests that service performance was flat for the other carriers over the quarter.
CPKC, NS, and UP all managed to improve across both employee and equipment safety metrics in Q4. But overall the industry reported slightly higher employee incidents, likely due to an influx of new, less-experienced employees post-pandemic. And equipment incidents overall were down, suggesting a stronger focus throughout the industry on track and equipment condition since the 2023 East Palestine incident.
Rail industry outlook for 2025
The outlook for 2025 right now is unclear, as tariffs — a major topic at the recent Davos summit — are imposed and then postponed. According to the Association of American Railroads, 38% of rail traffic is associated with imports/exports, so railroads are more exposed than many believe — and international container traffic has been the strongest growth segment over the past year. The huge amount of uncertainty in the economy will surely be a headwind for 2025. But overall, we expect rail volumes and revenues to be stable, with solid, but not record, earnings. For example, three of the four US Class I’s have already signed contract renewals with many of their unions, eliminating the uncertainty and conflicts associated with strike threats and minimizing the exogenous variables they must manage this year.
