(The Associated Press circulated the following on January 16.)
NEW YORK — Shares of most railroads rose in trading Wednesday, a day after a federal commission published a study recommending tax credits to expand the sector’s infrastructure.
Stifel Nicolaus analyst John G. Larkin said the recommendation by the National Surface Transportation Policy and Revenue Study Commission seemed to be in response to a previous request by rail industry for a 25 percent tax credit intended for infrastructure expansion projects.
Although the commission did not recommend a precise amount for the credit, Larkin said, it appeared to support one to make gradual infrastructure improvements.
While Larkin said he agrees with the commission’s recommendations, he’s doubtful they’ll be implemented. He predicts that capacity expansions will grow slowly over the long-term, which will mostly aid the biggest and best-managed freight companies.
Patient investors should be able to benefit from the potential tax credits and other catalysts that will drive rail stocks in the future. The benefits can be especially strong if investors buy the stocks soon, Larkin said, as they have been beaten down by near-term worries about low demand and excess supply.
The analyst said his top picks in the sector include Canadian National Railway Co. and Norfolk Southern Corp. He rates both “Buy.”
In midday trading, Norfolk Southern Corp. rose 33 cents to $46.58, while Union Pacific Corp. added $1.71 to $114.
Burlington Northern Santa Fe Corp. gained $1.80 to $79.11, while CSX Corp. rose 73 cents to $43.58.
Kansas City Southern added 43 cents to $31.31.
Canadian National Railway Co. added 9 cents to $44.91, and Canadian Pacific Railway Ltd. lost 19 cents to $61.52.