(The Associated Press circulated the following on September 4.)
NEW YORK — An analyst initiated coverage of the rail sector at “Overweight” Thursday, suggesting that the industry should post better earnings than Wall Street expects next year as strong pricing continues and demand returns.
Dahlman Rose analyst Jason Seidl predicts that railroad companies’ profits should grow by 24 percent on average next year, compared with analysts’ current consensus expectations of 19 percent growth. The analyst, who was most recently with Credit Suisse, also noted that his projections could prove conservative if demand or pricing improve or fuel prices continue to decline.
He has a “Buy” rating on shares of Canadian National, Canadian Pacific, CSX Corp., Kansas City Southern, Norfolk Southern and Union Pacific. He rates Burlington Northern Santa Fe Corp. at “Hold.”
Going forward, Seidl said risks for the rails include increased regulation, further weakening in the U.S. economy, more activist shareholder involvement and low staff levels.