Our quarterly North American Class I Freight Rail Performance report provides comparative operating and financial metrics for the continent's seven largest railroads: BNSF Railway (BNSF), Canadian National Railway (CN), Canadian Pacific Kansas City Ltd. (CPKC), CSX Transportation (CSX), Ferromex (FXE), Norfolk Southern Railway (NS), and Union Pacific Railroad (UP). All comparisons are for the current reporting quarter to the year-ago quarter (Q2 2026 to Q2 2025) unless otherwise stated.
How intermodal helped the rail industry win in Q2
All of the North American Class Is, except FXE, saw double-digit revenue increases for the quarter compared to Q2 2025. FXE still reported growth, but most of this was in lower revenue intermodal and resulted in just a 2.8% increase in revenue. All of the railroads reported their highest quarterly revenue in the past two years.
Intermodal was the key growth driver for the US carriers, led by 9.7% growth for BNSF. The two Canadian carriers reported slightly negative values, while FXE saw 22.3% growth in units. By equipment type, growth was primarily driven by domestic 53-foot containers, with double-digit growth for rail-owned equipment.
Carload traffic excluding coal showed gains across the board for all Class Is, led by FXE at 10% and BNSF at 6.8%. Based on reports from the Association of American Railroads (AAR) and the carriers, grain, petroleum, petroleum products, metals, and metallic ores were the strongest performing commodity groups in Q2. Coal volumes were mixed, with only NS and CSX showing increases, primarily in exports, and all other carriers showing a decline. Despite global increases in natural gas prices and record exports from the US, domestic production has grown sufficiently to supply the domestic market without large price increases, making natural gas the preferred fuel for electricity generation.
Revenue ton-miles (RTMs) grew across the board for all carriers, with FXE leading the pack at 9.9% and BNSF and NS showing increases of 6%. Revenue/RTM increased for all carriers except FXE. The two-year trend lines for each carrier showed a significant uptick for this quarter.
Railroad operating income improves for most carriers
Operating margins were largely flat in Q2 and have been largely flat for the past two years. Excluding FXE, UP led with a margin of 40.8%, while NS and BNSF trailed the others at 34.5%. CSX had the biggest improvement in operating margin, of 240 basis points year-over-year. While revenue/RTM grew, the cost/RTM also grew for all carriers except FXE. CN and CSX had the smallest increases in cost/RTM in this quarter. Interestingly, while CN had the lowest cost increase, it also had the lowest revenue/RTM increase, which did not cover the cost increase.
All railroads except NS saw both an increase in operating income in Q2 and the highest Q2 operating income since 2024. The two-year trend in operating income has started to turn upward as well, potentially signaling the start of a new upward trend.
Despite having among the lowest operating margins in the industry, BNSF and FXE saw the largest improvement in operating income over the past two years. They are also the only carriers to have a compound quarterly operating income growth rate of over 2% since 2024. Notably, these two carriers are not publicly traded as railroads, but are part of business conglomerates that are likely more focused on operating income than on operating margin.
Railroad stocks gain ground, while capital investment remains mixed
The Canadian and western US carriers all increased capex spend over the past four quarters, while the eastern US carriers and FXE reduced capex. Cumulative free cash flow over the past four quarters has been mixed, with NS generating the lowest free cash flow of the Class Is, except for the much smaller FXE.
FXE leads the industry in return on invested capital (ROIC) at 16%, followed by UP at 14.7%. Most railroads have an ROIC in the 10-11% range, except NS (8.1%) and CPKC (5.4%).
The industry has lagged the S&P 500 since early 2024, but the trend line, while still below the S&P 500 overall, has nearly tracked it in growth since the UP-NS merger was announced at the end of July 2025. Both Canadian carriers, however, are lagging overall industry stock performance.
Railroad service pressures rise as workforce shrinks, but safety improves
All railroads except FXE reported workforce reductions. This, combined with RTM growth, resulted in all carriers reporting RTMs per employee increasing by more than 5% compared to a year ago. The one red flag is that growth combined with fewer employees can lead to service problems — and operating metrics (dwell and velocity) generally showed worse performance this quarter.
We can look forward to the new STB service metrics, which are being reported from July onward: original estimated arrival time (OETA) and industry spot and pull (ISP). These metrics should be more relevant for shippers in gauging rail performance than average dwell and train speed. We expect to begin reporting these metrics in our Q3 report, as there should be three months of data available by then.
The industry’s focus on improving safety post-pandemic continues to pay off. The industry average for both employee injuries and equipment incidents declined this quarter. CSX, NS, and UP reported improvement on both metrics. BNSF reported an increase in equipment incidents and a decline in employee incidents. Both Canadian railroads reported worse performance on both safety metrics.
The industry average three-year trend has been positive, showing a drop of 5.3% in employee injuries and 22.5% in equipment incidents. The 2019-2026 trend is similarly good, with a 6.0% drop for both metrics.
Q2 performance could signal a new growth trend for rail
Given higher fuel prices and trucking capacity reductions, strong performance in Q2 could potentially signal the start of a new growth era for the rail industry — if it can avoid a repeat of the service hurdles that came with growth in the post-precision scheduled railroading (PSR) years.
Interestingly, both BNSF and FXE are leading the industry in quarterly compound operating income growth, while both have the lowest operating margins. Is this the wake-up call the industry needs to shift to focusing on growth rather than operating ratio?
Q3 data will show not only if the growth trend continues, but also if the industry's focus on cost-cutting has gone too far, meaning that more growth triggers a decline in service levels. The hope is that Q2 marks the beginning of a turning point toward long-term growth — and not just a brief high point.
