NEW YORK — A wire service reports that UBS Warburg said on Wednesday it raised its rating of CSX Corp (NYSE:CSX – News) to “buy” from “hold,” citing the U.S. railway operator’s weak share price and potential to improve operating margins.
UBS analyst Rick Paterson said that since CSX has the worst operating ratios in the rail sector, it has the most potential for margin improvements. Paterson expects CSX margins to reach 81.5 percent in 2004 down from a current 87.5 percent margin.
Paterson also said he expects CSX will improve its balance sheet with little or no negative effect to its earnings by selling one or both of its two nonrail businesses over time. These include a domestic ocean shipping business and a container terminals business, according to Paterson.
The analyst said that current price weakness makes it a good time to buy CSX shares. Paterson’s price target for CSX is $39. The company stock was up 64 cents, or almost 2 percent, at $33.09 in morning trade on the New York Stock Exchange.