The two transportation ETFs also include exposure to the trucking and marine transportation sub-sectors. IYT tracks 23.4% trucking and 7.4% marine while XTN holds 36.3% trucking and 3.8% marine.
Many railroad companies have become more efficient, cutting costs wherever they can, which should help bolster their bottom line ahead.
The industry is also showing bargain valuations, with CSX and Norfolk Southern trading for about 13 times forward earnings. IYT shows a 13.8 price-to-earnings and XTN has a 13.1 P/E, whereas the S&P 500 is trading at a 17.5 P/E.
Additionally, market observers are optimistic about a cyclical recovery where U.S. consumers and businesses spend more, which would add to increased activity through railways and transportation sectors.
For more information on the transportation sector, visit our transportation category.
Max Chen contributed to this article.