When was the last time you took a close look at the top railroad stocks? If you are like most investors, the thought of investing in railroad companies rarely crosses your mind.

Railroad tracks are usually out of sight, so the industry tends to be out of mind. Add in the fact that the mainstream investing media rarely touches on the merits of railroad stocks, and there is even more reason for investors to zero in on this often-overlooked space.

Let’s shift our attention to two specific railroad stocks investors should consider for portfolio diversification. Those two stocks are Union Pacific Corporation (UNP - Get Rating) and CSX (CSX - Get Rating).

Union Pacific Corporation (UNP - Get Rating)

UNP provides rail transportation services in nearly half the United States. This publicly-traded company is the largest railway on the entire continent. UNP connects the Gulf Coast and Pacific ports with the Midwestern states and the eastern part of the country. Though few know it, UNP’s rail systems combine with those of Canada. This is the lone railroad business that serves the half dozen Mexican gateways. UNP’s rail lines transport everything from automotive products to agricultural products, industrial products, and more.

UNP has an overall grade of B, which translates into a Buy rating in our POWR Ratings system. The stock has an A Quality Grade and Bs in the Sentiment, Momentum, and Stability components. Investors can find out how UNP fares in the Value and Growth components by clicking here.

Out of 17 publicly traded companies in the Railroads industry, UNP is ranked second. You can find other top stocks in this industry by clicking here. 

Analysts are bullish on UNP, establishing an average target price of 

$250.63 for the stock. If UNP hits this price point, it will have popped by more than 15%. UNP’s average analyst price target has increased by $16.51 across the previous 105 days. Eight analysts rated the stock a Strong, while fourteen rate it a Buy.

CSX (CSX - Get Rating)

CSX is one of the top transportation businesses in the country. Located in Jacksonville, Florida, CSX is a rail-based freight transportation service provider. CSX provides traditional rail line service, intermodal container transportation, and more.

CSX has an overall grade of B and a Buy rating in our POWR Ratings system. The stock has B grades in the Quality, Momentum, and Sentiment components. If you are curious as to how CSX performs in the rest of the components, including Value, Stability, and Growth, you can find out by clicking here. Of the 17 publicly traded companies in the Railroads industry, CSX is ranked third. 

Analysts are pounding the table for CSX to move even higher. The average analyst price target for the stock is $36.57. This means CSX has nearly 14% upside potential. One analyst has gone as far as setting a price target of $40 for the stock.

UNP shares were unchanged in premarket trading Thursday. Year-to-date, UNP has gained 5.50%, versus a 18.46% rise in the benchmark S&P 500 index during the same period.

About the Author: Patrick Ryan

Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management. More...

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