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<div style="margin:0in 0in 8pt;"><span style="font-family:Calibri;">America’s Class I freight railroads are turning in impressive financial numbers.<span>  They are for the most part out performing the nation's S&P 500 companies. </span>Here are a few indicators to make my point.<span>  </span>I have shown the high and low for each category.<span>  </span>The others fell in between.<span>  </span></span></div> <div style="margin:0in 0in 8pt;"><span style="font-family:Calibri;">The Trailing Twelve Month (TTM) average Return on Equity (ROE) for the Class 1 freight railroads was 18.46 per cent, which was 3.44 per cent higher than the average for the S&P 500.<span>   </span>The Union Pacific had an ROE of 23.03 per cent, whilst the Kansas City Southern came in at 13.62 per cent.<span>  </span>The standard deviation for ROE was 7.14.</span></div> <div style="margin:0in 0in 8pt;"><span style="font-family:Calibri;">The TTM average Return on Assets (ROA) for the Class 1s was 7.45 vs. 2.99 for the S&P 500.<span>  </span>CN’s ROA was 9.77 per cent, whilst CSX’s ROA was 5.82 per cent.<span>  </span>The standard deviation was 1.49. <span>   </span><span>  </span></span></div> <div style="margin:0in 0in 8pt;"><span style="font-family:Calibri;">The UP had the best TTM Total Return on Investment (TROI) at 10.67 per cent, whilst the CSX had a TROI of 6.44 per cent, with Norfolk Southern just beating it at 6.70 per cent.<span>  </span>The average TROI for the Class 1s was 8.22 per cent and the standard deviation was 3.33 per cent. The average S&P TROI was 5.29 per cent. </span></div> <div style="margin:0in 0in 8pt;"><span style="font-family:Calibri;">In addition to these key financial ratios, the average revenue generated per employee, as well as the average net income generated per employee, hints at the productivity of the company’s workers.</span></div> <div style="margin:0in 0in 8pt;"><span style="font-family:Calibri;">The average revenue per employee was $440,795.<span>  </span>The Canadian roads don’t report this number.<span>  </span>Of those that do BNSF topped the list at $508,966 per employee – a calculated number, whilst the Norfolk Southern had the lowest at $386,510.<span>  </span>The western roads were well above the average; the eastern roads were substantially below it.<span>  </span></span></div> <div style="margin:0in 0in 8pt;"><span style="font-family:Calibri;">Translating average revenue per employee into average income per employee, i.e. how much each employee delivers to the bottom line, the average amount of revenue flowing through to average net income was 17.9 per cent.<span>  </span>UP topped the list at 21 per cent, followed by Kansas City Southern at 18.6 per cent.<span>  </span>The others ranged from 14.7 per cent to 17.2 per cent. </span></div> <div style="margin:0in 0in 8pt;"><span style="font-family:Calibri;">America’s Class 1 railroads continue to turn-in impressive financial numbers.<span>  </span>As well as the ratios shown above, there are numerous other indicators that the railroads are meeting or exceeding investor’s expectations.<span>  </span>Which raises an interesting question?<span>  </span>Would merging the Class 1s into two or three mega systems really generate a better outcome?<span>  </span>I think not.</span></div> <div style="margin:0in 0in 8pt;"><span style="font-family:Calibri;">These numbers are taken from widely published financials that can be found at Fidelity Investment, Yahoo Financials, Bloomberg, etc.<span>  </span>I pulled them from Fidelity Investments website. </span></div> <div style="margin:0in 0in 8pt;"><span style="font-family:Calibri;"> </span></div> <div style="margin:0in 0in 8pt;"><span style="font-family:Calibri;"> </span></div> <div style="margin:0in 0in 8pt;"><span style="font-family:Calibri;"> </span></div>
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