(The following report appeared at Canada.com on July 28.)
OTTAWA — It may be a tough time for the broader market, but most of North America’s Class I railroads are on track with their earnings.
With all seven of them having reported second quarter earnings, the results show that only one failed to meet or exceed the Street’s estimates, according to UBS Securities.
CSX Corp. (CSX/NYSE) lead the way, beating forecasts by more than 10%, while fuel costs and deteriorating margins made Burlington Northern Santa Fe Corp. (BNI/NYSE) the only rail to disappoint.
As for the Canadian names, Canadian National Railway Co. (CNR/TSX) beat the consensus by 3¢ at 95¢ per share, while Canadian Pacific Railway Ltd. (CP/TSX) met expectations of $1.12.
CN Rail and Norfolk Southern Corp. (NSC/NYSE) are the top picks in the sector at UBS.
“Our rationale is that these two stocks will benefit from the strong secular pricing trend that is currently underway while at the same time presenting investors with minimal execution risk given the superior quality of operations and management,” the firm’s analysts told clients in a note.
“They’re also the two cheapest stocks in the sector with the highest free cash flow yields.”
They continue to link Union Pacific Corp. (UNP/NYSE) most for the long-term.