Yield, or revenue per car is another railroad performance measure I calculate. Because the capital and operating costs of rail are similar no matter if they are filled with raw sewage or gold, railroads with a higher yield are in a better position to put mad cash in their shareholders’ pockets. Keep in mind, since I am measuring revenue per car and not profit per car, management can fuck up and lose money while hauling gold. Conversely, a well managed railroad can make a nice profit hauling raw sewage.

So, if management will probably find ways to waste money anyway, why look for a high yield? Railroads with high yields and improving profitability may be turnaround plays. To calculate the yield, simply divide total revenue by the number of cars hauled. Cars hauled can generally be found under: volumes, volume and revenue, revenue table, revenues, or similar table headings. Searching for carloads or cars hauled also works nicely. Because I am lazy, I do not bother to subtract out non-freight revenue when calculating the yield. While this may be technically incorrect, revenues from operations other than moving shit around are generally a small percentage of the total and are therefore insignificant.

Now, for fun, I will draw a few conclusions from the above table. First, all of the railroads are clearly enjoying pricing power. This is obvious because yield has increased year over year for each of the railroads and current yields are all above the five year average. Second, Norfolk Southern (NSC) is far below the average industry yield for 2005, 2006, and the 2001 - 2005 average. However, alert readers will recall from railroad operating ratios that NSC has a better than average operating ratio that has improved dramatically over the 2001 - 2005 average.

To show how yield and operating ratio work together to determine profit, I subtracted the Operating Ratio from 100 and multiplied by the Yield for both NSC and CSX, its closest rival. Using this measure of profitability, NSC makes $324 in profit per car, or roughly 21 percent less than CSX, which makes $412 per car. If NSC were to increase its yield to the same level as CSX, say by reducing the amount of raw sewage hauled and replacing it with gold, they would make $502 per car in profit, or 18 percent more than CSX.

Yield is simply one performance measure. See also Railroad Performance Measures: Average Train Speed, the next article in the series, or Railroad Performance Measures: Operating Ratio at the beginning of this series.