North American 2023 Railway Outlook: Railways Chugging Along Despite a Slowing Economy
DBRS Morningstar’s neutral 2023 outlook for the North American railway sector reflects our view that the credit risk profiles of railroads in our portfolio will continue to remain supportive of their current ratings. Despite elevated inflation and interest rates, and our projection of an overall economic slowdown, we forecast railways to show resilient revenue and flat to modestly weakening margins, which should support stable cash flow generation. We believe railways will mitigate margin pressures through a sustained focus on improving productivity and managing costs. Also, we expect them to use free cash flow and/or the balance sheet to drive shareholder returns but keep credit metrics within the bounds of the rating levels.“Although we do not expect any ratings actions, any significant deterioration in operating or credit metrics whether because of a deep recession or large increases in shareholder remuneration may affect the ratings,” notes Vineet Khattar, Vice President – Diversified Industries.
Canadian Pacific Railway operates a transcontinental railway in Canada and the U.S. Co.'s business mix includes bulk commodities, merchandise freight and intermodal traffic, serving the principal business centers of Canada from Montreal, Quebec, to Vancouver, British Columbia, and the U.S. Northeast and Midwest regions. As of Dec 31 2016, Co. operated on a network of approximately 12,400 miles of track, of which CP owns 10,800 miles and has access to 1,600 miles under trackage rights and lease agreements. Of the total mileage operated, about 5,600 miles were located in western Canada, 2,000 miles in eastern Canada, 4,400 miles in the U.S. Midwest and 400 miles in the U.S. Northeast.
DBRS Morningstar is a global credit ratings business with 700 employees in eight offices globally. DBRS and Morningstar Credit Ratings are committed to empowering investor success, serving the market through leading-edge technology and raising the bar for the industry.
Together, we are the world’s fourth largest credit ratings agency and a market leader in Canada, the U.S. and Europe in multiple asset classes. We rate more than 2,600 issuers and 54,000 securities worldwide and are driven to bring more clarity, diversity and responsiveness to the ratings process. Our approach and size provide the agility to respond to customers’ needs, while being large enough to provide the necessary expertise and resources. For more details visit us at dbrs.com.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.