North American Freight Railways 2025 Outlook: Cautiously Optimistic Amid Rising Political Risks

Our outlook for North American freight railways in 2025 is stable. We believe the credit risk profiles of the Class 1 railways should remain stable or modestly improve through the year and broadly continue to remain reflective of the current credit ratings.

Key Highlights
-- Barring any realization of negative political risks, credit risk profiles across the sector should remain stable.
-- Volumes and pricing actions should push revenue higher.
-- Labour costs and competition from trucking may add to some margin pressures.
-- Productivity improvements, price actions, and increased volumes should translate to better margins/operating ratios.
-- Disciplined capital allocations to capital expenditures and shareholder returns should keep credit metrics in line with respective ratings.
-- Decline in the regulatory risks in the past few years should be met by increased political risks to the North American trade.

"Overall, absent any significant negative surprises affecting North American trade, we expect Class 1 freight railways to exhibit revenue and margin growth. This, coupled with disciplined capital allocation, should keep the credit risk profiles of freight railways in sync with their respective credit ratings," said Vineet Khattar, Vice President, Diversified Industries.