The white noise of the Federal Reserve has drowned out the roar of the rail industry. While others argue about the macroeconomic picture, railroads have been chugging along at a steady pace. The Dow Jones Transportation Index has soared 18% this year — the average gain of the top three railroads is 26%.

The U.S. rail market is a $60 billion industry, with more than 140,000 miles of track across the nation. And what’s being moved the most? #-ad_banner-#

Oil. Coal. Chemicals.

Coal alone accounts for 43% of the total tonnage moved by train. Crude oil shipments, trending away from pipelines, spiked 256% in 2012 to 167 million barrels in nearly 234,000 freight cars. By 2016, more than 2.7 million barrels of oil a day is expected to be transported by rail — more than the entire Trans-Alaskan pipeline.

Rail ships oil faster than pipelines — 15 to 20 miles an hour by train compared with 4 to 5 miles an hour by pipeline. It’s also more flexible. The expanse of the rail system — and avoidance of political and regulatory quagmires that plague pipelines — makes shipments by train a more attractive option.

An energy revolution is taking place in America thanks to new technologies in drilling and higher oil prices. With that revolution comes the need for more efficient overland transportation. One company in particular is in the right place at the right time.

Large rail companies stand to profit considerably from the increase in oil and gas market demands and have attracted investors such as Warren Buffett, whose Berkshire Hathaway (NYSE: BRK) acquired BNSF in 2009, and Bill Gates, who owns 12% of Canadian National Railway (NYSE: CNI), making him its largest shareholder.

A little-known industrial conglomerate that dominates the railcar manufacturing and leasing industry, Trinity Industries (NYSE: TRN) saw net revenue increase 79% last year and boosted its dividend 22%. In its second-quarter earnings report on July 31, Trinity beat analysts‘ estimates with revenue of $1.1 billion, up 7% from the same quarter last year, and profit of $84 million, up nearly 24%.

A stock that stays under the analysts’ radar often proves to be quite a boon for savvy investors who can identify value. Trinity may have the most inherent opportunity right now because no one’s looking at the numbers.

Trinity’s main competition, American Railcar (Nasdaq: ARII), also recently announced impressive second-quarter earnings and reported heavy investment in its leasing business. Although American Railcar has a market share of less than $750 million, it has much the same story as Trinity and stands to profit from the same catalysts. However, American’s negative free cash flow concerns tied to high capital expenditures make Trinity the better play for now.

Investors in Trinity have an additional perk in the form of its dividend, while yielding a conservative 1.4%, has been increased three times since 2010, for a gain of more 60 %. With a payout ratio of about 13%, there’s plenty of room for continued growth.

In its earnings report this week, Trinity also raised its full-year earnings expectations to $4.20 to $4.40 a share, up from the range of $3.80 to $4.05 it forecast in May . Trinity’s forward price-to-earnings (P/E) ratio is less than its current P/E, which can be a powerful indicator of future earnings growth. 

As higher earnings are reported, it’s a fair assumption that Trinity’s P/E should increase from 11, but not exceed its historical average of 17, which gives a price estimate of anywhere between $44 and $68 – that’s a gain of 19% to 83%. The consensus price target on the Street is $45.75 in the next 12 months, according to S&P Capital IQ.

Risks to Consider: A slowing economy or lower than expected oil production could derail Trinity’s railcar sales and keep its P/E low. Leasing operations may hurt short-term earnings as revenues from such operations are not recognized as occurring as a sale but from a monthly income stream.

Action to Take –> A solid balance sheet and thriving railcar segment with a multi-billion-dollar backlog should give Trinity the momentum to climb higher over the next 12 months. 

P.S. — Warren Buffett is the ultimate buy-and-hold investor, so it makes sense that railroads would appeal to him — because railroads likely aren’t going away anytime soon, if ever. In that way, stocks like TRN are like a special group of securities we call “Forever Stocks” — stock solid enough to buy, forget about and hold “Forever.” To learn more about these stocks — including some of their names and ticker symbols — click here.