(The Associated Press circulated the following on October 3.)
NEW YORK — Shares of major railroad operators fell in trading Wednesday after a Morgan Stanley analyst downgraded shares of CSX Corp., citing increasing risk and volumes that lag behind the already-struggling sector.
Analyst William J. Greene lowered his rating on stock from “Equal Weight” to “Underweight,” saying the company’s long-term objectives seem increasingly difficult to reach as CSX struggles to maintain strong pricing, cut costs and grow revenue.
Greene said he believes other railroads will outperform CSX over the next six months to a year, namely Norfolk Southern Corp. or Union Pacific Corp. which he rates “Overweight.”
BB&T Capital Markets analyst John L. Barnes III said although slipping volumes, excess capacity and a tough pricing environment persisted throughout the third quarter for railroads, he believes the rail companies still have the upper hand compared to other transportation stocks, noting that carload volume declines have not translated into the tough margins and disappointing earnings as in other sectors.
“We remain bullish on the rails longer term,” the analyst said. “We believe that railroad fundamentals remain among the best in the transportation industry, especially compared to the trucking and domestic package sectors.”
In afternoon trading, shares of CSX Corp. fell $1.13, or 2.6 percent, to $41.90. The stock has ranged between $32.54 and $51.88 in the past year.
Union Pacific Corp. slipped $1.80 to $111.53, while Norfolk Southern Corp. lost $1.53 to $50.53.
Burlington Northern Santa Fe Corp. fell $1.42 to $81.47 and Kansas City Southern slipped 59 cents to $31.99.
Canadian Pacific Railway Co. fell $1.22 to $70.59.