(The Associated Press circulated the following article on March 6.)
NEW YORK — Shares of the nation’s largest railroad operators bounced modestly higher on Tuesday after Prudential Equity Group initiated coverage on the sector, citing Burlington North Santa Fe, Norfolk Southern Corp. and Canadian Pacific Railway Ltd. as top names.
Shares of Burlington Northern rose 24 cents to $77.11 in midday trading, while Norfolk Southern added 46 cents to $46.50 and Canadian Pacific gained 3 cents to $53.26. All three names trade on the New York Stock Exchange.
Prudential analyst Lee Klaskow started the three railroads at “Overweight.” Klaskow said the trio stands to benefit from their exposure to “the holy trinity of freight,” or coal, agriculture and intermodal. Intermodal involves transferring freight among types of transportation, such as loading shipping containers onto rail cars for final delivery.
“We believe BNI’s freight revenue mix is also attractive because of its relatively small exposure to the automotive and construction end markets,” Klaskow said in a research note. The analyst called Norfolk Southern “very well positioned” to take advantage of more international containers entering the U.S. from the East Coast and the Gulf of Mexico through the Suez and Panama canals.
Canadian Pacific, meanwhile, is positioned to take advantage of intermodal traffic entering Vancouver ports, as shippers seek an alternative to crowded destinations in Los Angeles and Long Beach, Klaskow said. The railroad is also improving it operating ratio, taking a page from its more efficient peer Canadian National Railway Co.
“We believe Canadian Pacific is finally coming into its own,” Klaskow said. “Investors, especially U.S. investors, should begin to take notice of the other Canadian railroad.”
The analyst started Canadian National at “Neutral.” He also started Union Pacific Corp. at “Neutral” and CSX at “Underweight.” Shares of CSX bucked the rating and rallied $1.26, or 3.6 percent, to $36.74. Shares of Union Pacific rose 26 cents to $96.37, and shares of Canadian National added 42 cents to $44.03.
Rail stocks also found support in the broader markets, which regained some footing after several days off heavy losses. The Dow Jones industrial average was up 98.62 at 12,149.03 at midday. The Standard & Poor’s 500 index advanced 13.74 at 1,387.86, and the Nasdaq composite index, put on 30.06 at 2,370.74.