Those railroads achieved a rate of return on net investment (ROI) equal to or greater than the Board’s calculation of the average cost of capital for the freight rail industry, which for 2024 was 10.68%, according to the STB’s Aug. 14 decision (scroll down to download). The annual cost of capital—reported last month—represents the STB Office of Economics’ estimate of the average rate of return needed to persuade investors to provide capital to the industry.
If the railroads’ annual cost of capital was determined to be 10% or less, BNSF and Norfolk Southern would have been revenue adequate.
By comparing the 2024 cost of capital to the 2024 ROIs—calculated from data reported in the carriers’ Annual Report R-1 Schedule 250 filings, which do not include rail operations in Canada or Mexico—a revenue adequacy figure has been determined for each of the six Class I’s in operation as of Dec. 31, 2024.
Following are the 2024 Class I ROIs (railroads in bold are revenue adequate):
- BNSF: 10.17%
- CSX: 13.72%
- Grand Trunk Corp. (the U.S. affiliate of CN): 6.64%
- Norfolk Southern: 10.52%
- Soo Line/Kansas City Southern Railway Company (the U.S. affiliate of Canadian Pacific Kansas City): 5.68%
- Union Pacific: 16.19%
Railway Age provides the revenue adequacy results for 2018-23 here:
—For 2023, the STB found that three Class I’s were revenue adequate; the cost of capital for the year was 9.87%. Below are the 2023 Class I ROIs (railroads in bold are revenue adequate):
- BNSF: 10.63%
- CSX: 14.27%
- Grand Trunk Corp. (the U.S. affiliate of CN): 7.81%
- Norfolk Southern: 8.03%
- Soo Line/Kansas City Southern Railway Company (the U.S. affiliate of Canadian Pacific Kansas City): 5.10% (On April 14, 2023, Kansas City Southern merged with Canadian Pacific to form Canadian Pacific Kansas City.)
- Union Pacific: 15.98%
—The STB found that five Class I’s were revenue adequate for 2022; the 2022 cost of capital was 10.58%. Below are the 2022 Class I ROIs (railroads in bold are revenue adequate):
- BNSF: 12.89%
- CSX: 16.17%
- Grand Trunk Corp. (the U.S. affiliate of CN): 8.99%
- Kansas City Southern: 9.19%
- Norfolk Southern: 14.55%
- Soo Line (the U.S. affiliate of Canadian Pacific): 13.31%
- Union Pacific: 17.96%
—The STB found that the same five Class I’s were revenue adequate for 2021; the cost of capital for the year was 10.37%. Following are the 2021 Class I ROIs (railroads in bold were revenue adequate):
- BNSF: 13.19%
- CSX: 15.51%
- Grand Trunk Corp. (the U.S. affiliate of CN): 7.79%
- Kansas City Southern: 8.25%
- Norfolk Southern: 13.18%
- Soo Line (the U.S. affiliate of Canadian Pacific): 13.51%
- Union Pacific: 17.03%
—For 2020, five Class I’s—BNSF, CSX, Kansas City Southern, Soo Line and Union Pacific—were found to be revenue adequate; the 2020 cost of capital was 7.89%. Below are the 2020 Class I ROIs (railroads in bold were revenue adequate):
- BNSF: 11.60%
- CSX: 11.35%
- Grand Trunk Corp. (the U.S. affiliate of CN): 7.20%
- Kansas City Southern: 8.06%
- Norfolk Southern: 7.52%
- Soo Line (the U.S. affiliate of Canadian Pacific): 10.68%
- Union Pacific: 14.44%
—For 2019, the five Class I’s found to be revenue adequate were BNSF, CSX, Norfolk Southern, Soo Line and Union Pacific; the cost of capital for the year was 9.34%. Below are the 2019 Class I ROIs (railroads in bold were revenue adequate):
- BNSF: 12.04%
- CSX: 12.84%
- Grand Trunk Corp. (the U.S. affiliate of CN): 7.47%
- Kansas City Southern: 6.20%
- Norfolk Southern: 11.59%
- Soo Line (the U.S. affiliate of Canadian Pacific): 11.34%
- Union Pacific: 15.55%
—For 2018, the STB determined that three Class I’s—CSX, Soo Line and Union Pacific—were revenue adequate; the cost of capital for the year was 12.22%. Following are the 2018 Class I ROIs (railroads in bold were revenue adequate):
- BNSF: 11.89%
- CSX: 13.18%
- Grand Trunk Corp. (the U.S. affiliate of CN): 7.69%
- Kansas City Southern: 8.03%
- Norfolk Southern: 11.63%
- Soo Line (the U.S. affiliate of Canadian Pacific): 13.49%
- Union Pacific: 15.80%
In a related development, the STB recently discontinued proceedings in which it sought comment on proposed modifications to its procedures for annually determining whether Class I railroads are revenue adequate. The decision is “in the interest of administrative efficiency,” as the Board is “prioritizing other, mission-critical matters at this time,” it said.
