#analytics Analysis of the rail transport sector Do you ha | WhiteRaven Capital
#analytics
Analysis of the rail transport sector
Do you have shares of railroad companies in your portfolio? If not, you should add them, because companies in this industry are known not only for their high-quality assets but also for their reliable dividends.
Let's take a closer look at what the railroad industry has to offer.
Typically, railroad companies are characterized by increasing profits mainly through mergers and acquisitions with other companies. This is what makes railroads different from others and makes them so interesting to invest in.
The downside is that the stock quotes are highly dependent on the demand for the company's services.
We can see tremendous competition to buy Kansas City Southern. It received many offers from private equity firms last year before agreeing in March to a deal with Canadian National Railway Co, which offered 20-50% more than other competitors.
The price per share was $325 and the railroad was valued at $33.7 billion, including the assumption of debt. The company is now awaiting approval from the Surface Transportation Board.
What caused such a stir?
Along with Kansas City Southern, Canadian National, as the only major carrier in Mexico, is looking at the prospect of creating a seamless north-south railroad that could effectively compete with trucks.
Kansas City Southern is likely to be the latest viable takeover target among major North American railroads.
There are now only seven Class 1 railroads in North America. Eight if you count Amtrak. If Kansas City Southern is acquired, their number would go back to seven.
Low competition is a good thing, as cash flows become more predictable and stable. And mergers can be seen as positive signals for the companies involved and perhaps for the industry as a whole.
Railroad companies are also worth a closer look because Joe Biden plans to launch a second great railroad revolution. U.S. railroads can look forward to increased investment and efficiency under a sitting president's administration.
