Vontobel makes the case that North American listed railroads combine hard to replicate infrastructure with pricing power and limited competition. It argues the industry has moved from regulated capital drag to a more efficient network model, with margins near 40% and stronger long term earnings potential.
The Investment Case for Listed Railroads
Vontobel
Research
4 Pages
Key Takeaways
Infrastructure Drives Moats: Annual maintenance spending is about $16 billion, or 16% of revenue, helping keep barriers to entry high and networks hard to replicate.
Competition Is Constrained: Industrial customers and commodity producers make up about 80% of rail freight revenue and are generally served by a single railroad.
Margins Have Expanded: Operating margins improved from roughly 20% in the early 2000s to about 40% by 2021, while average ROIC was around 11% over the last 2 decades.
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