Key Performance Indicators in the Railroad Industry

There are five Class 1 Railways traded in the US market. If you look at each railway’s respective annual and quarterly filings, all of them report certain key performance indicators (KPIs). Within the annual reports, the railway identifies the total number of revenue tons. In effect this identifies the total volume of tonnage moved. With quarterly filings, the primary KPI is the number of rail cars moved during the period. In addition, they identify the volume of rail cars moved in a mix of various products. The key here is that each product moved has a different charge rate, thus certain products moved are more lucrative to the rail line over others.

A third KPI identifies the average speed of the rail line. The average reader wouldn’t think this is important, but in reality it is a critical aspect of understanding the railroad’s performance. The higher the average speed, the lower the overall cost to transport the product thus improving gross margins. This article introduces the reader to these various KPI’s and prioritizes KPI’s so an investor can discern the potential for profit. The sections below cover the common terms used to measure productivity in this industry.

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