Rails Demonstrate Earnings Resilience Despite Challenged Operating Backdrop

Research evidence excerpt

Rails Demonstrate Earnings Resilience Despite Challenged Operating Backdrop

June 30, 2026

Freight Monitor Weekly

Transportation

Rails Demonstrate Earnings Resilience Despite

Challenged Operating Backdrop Fadi Chamoun, CFA Analyst

fadi.chamoun@bmo.com (416) 359-6775

The North American rail industry is now more than three years into what has proven to be a

Amanda Abraham, CFA Senior Associate

prolonged and deep freight recession. While we recognize momentum has turned the

amanda.abraham@bmo.com (416) 816-9139

corner and the outlook from here appears increasingly optimistic, we believe the

performance of the North American rails throughout the downturn underscores the Fred Kornachev Senior Associate

structural resilience of the companies. fred.kornachev@bmo.com (437) 335-0049

Recent years have been plagued with subdued volume growth, persistent inflationary Legal Entity: BMO Nesbitt Burns Inc.

pressures, and decelerating headline pricing trends—a combination which, at face value,

should have driven a meaningful contraction to rail earnings. Yet despite this challenging

operating backdrop, industry EPS has remained relatively resilient, compounding at an Week 25 ended June 27, 2026

industry average growth rate of +0.5% (Exhibit 1). In our view, this resilience highlights the Carloads*

structural improvements to the industry's profitability and free cash flow profile, a theme Week 4WMA QTD YTD

we explored in greater detail in our recent industry deep dive (link to note). y/y % y/y% y/y % y/y%

Coal -4.9% -5.5% -5.3% -0.8%

At first glance, pricing appears to have been the largest headwind facing the North

American rails over the past several years, with cents/RTM acting as a meaningful drag on Agriculture 12.7% 9.7% 9.0% 8.7%

industry EPS.