(The Associated Press circulated the following article on April 3.)
NEW YORK — CSX Corp. shares rose to a fresh year-high on Monday, lifted by a bullish call from Bear Stearns, which predicted that robust demand for coal transport and recent operational improvements would bolster the railway operator’s financial performance this year.
Shares of CSX, whose CSX Transportation unit operates the largest railroad in the eastern United States, added $1.84, or 3 percent, to $61.64 on the New York Stock Exchange, above a previous year-high of $60.40 set Friday. The stock is up 22 percent so far this year, on a dividend adjusted basis.
“After spending time with management and other industry insiders, we have greater conviction in the sustainability of CSX’s recent network operating improvement, continued strong coal volume growth, and potential for increased volume growth in general during the second half of 2006, which we believe is not currently in the stock,” analyst Edward M. Wolfe wrote in a client note.
CSX has improved train speeds, dwell times, cars on line and on-time performance in this year’s first quarter, Wolfe said. The investment bank raised its opinion on the company to “Outperform” from “Peer Perform” with a $71 price target.
Rising petroleum and natural gas prices in recent months has spurred demand for coal as a cheaper energy source, which has been positive news for railway companies that haul coal from mines to power plants.
As a result of greater coal demand, railway companies have been able to raise rates and are investing heavily to build new railways and buy more locomotives. Out of all the rail companies, CSX has the highest exposure to coal, Wolfe said.
“While a lot of good news is currently priced into CSX and the rails generally, we believe near and intermediate term upside should be even better than investors expect, despite weak recent volumes,” Wolfe said.