Skip to Content
US Videos

Union Pacific Is Our Favorite Railroad Today

Valuations have become lofty in much of the intermodal space, but there are still some opportunities for investors, says Morningstar's Matthew Young.

Mentioned: , ,

Matthew Young: The $18 billion rail intermodal industry (referring to the movement of shipping containers on rail cars) ran into a few stubborn headwinds in 2016, but we don't think these factors will derail its long-term growth potential. Intermodal has also become the secular growth story for the North American railroads, and we think it will continue to offset the impact of lackluster coal carloads. That said, investors should tread carefully. Opportunities exist in the space, but in some cases valuations have become lofty.

The broader intermodal landscape enjoyed solid expansion throughout most of the current economic expansion phase, with 6% average container volume growth between 2010 and 2015. And over that period, robust truck to rail conversion activity played a key role in its growth over and above retail sales. However, container demand hit a rough patch in 2016 for two key reasons. First, cheap diesel fuel, and second, falling rates across the competing over-the-road truckload industry linked to excess capacity.

Matthew Young does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.