North America's Class I railroads have reported extraordinary increases in their efficiency, as evidenced by their operating ratios, the total proportion of revenue spent on expenses. Over the last two decades since deregulation, railroads have been eliminating underperforming lines, modernizing their systems, and generally making their operations more attractive. The more efficient railroads can be, the better able they are to compete in the intercity freight market.
As railroads continue to bring down costs, the rates they can offer customers look ever more efficient. At the same time, the rail industry's biggest competitor in intercity freight -- trucks -- will suffer. Trucking will contend with stricter and stricter environmental regulations that push costs up, requiring truckers to adopt expensive new systems to deal with carbon and particulate pollution. In the following video, Motley Fool contributor Daniel Ferry assesses the incredible successes the rail industry has achieved and the opportunities it faces.
Fool contributor Daniel Ferry owns shares of Canadian National Railway. The Motley Fool recommends Canadian National Railway. The Motley Fool owns shares of CSX. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.