(The Associated Press circulated the following on April 4.)
NEW YORK — Shares of railroad operators fluctuated Friday as the broader market regained ground, while two major players were downgraded to “Neutral” as analysts said the stocks are too expensive to earn a “Buy” rating.
Also, a CIBC World Markets analyst suggested carload volumes across the sector will rebound in the second half of this year. Analyst Jacob Bout said strong pricing, which has helped offset lower volumes so far this year, should continue to help the rails if freight demand worsens.
UBS analyst Rick Paterson cut shares of Kansas City Southern to “Neutral” from “Buy,” saying the price run up in recent weeks that he believes has outpaced company fundamentals. He still holds an optimistic outlook for the railroad’s first-quarter results, though, despite the weighty effects of a weak U.S. economy and soaring fuel costs.
A BMO Capital Markets analyst also cut Kansas City Southern to “Market Perform” or “Neutral” to “Outperform.”
Also Friday, a Merrill Lynch analyst downgraded railroad CSX Corp. to “Neutral” from “Buy.”
In midday trading, Kansas City Southern fell $1.13, or 2.8 percent, to $39.92. CSX Corp. fell $1.06 to $57.60.
Elsewhere in the sector, Union Pacific Corp. added $1.87 to $133.94, while Burlington Northern Santa Fe Corp. gained 96 cents to $96.79.
Canadian National Railway Co. rose 51 cents to $51.40, and Canadian Pacific Railway Ltd. rose 7 cents to $66.66.