(The Associated Press circulated the following article on December 13.)
NEW YORK — Shares of railroad operator CSX Corp. tumbled on Wednesday after an analyst downgraded the stock, saying it had grown too expensive and that the company could miss earnings targets in the fourth quarter.
Shares of Jacksonville, Fla.-based CSX fell $1.62, or 4.4 percent, to $35.04 in midday trading on the New York Stock Exchange. At one point in the session, the stock traded as low as $34.82. It has traded in a 52-week range of $24.17 to $38.30.
Edward Wolfe, an analyst at Bear Stearns, downgraded the stock to “Peer Perform” from “Outperform.” Wolfe said the stock presently trades too closely to his year-end target price of $39, and to a premium versus other names in the group.
Wolfe also said the company faces fourth-quarter earnings headwinds.
“Our sense is that CSX is the most likely of the large cap rails to miss,” Wolfe said in a research note.
Wolfe cited a $45 million year-over-year fuel hedge, a more severe decline in volumes than the company probably expected, and a commitment from management to sticking to its near-term operating plan regardless of costs overrides.
The analyst also trimmed his fourth-quarter earnings forecast on CSX to 55 cents per share from 58 cents per share. Analysts polled by Thomson Financial expect a profit of 59 cents per share.
Wolfe retained his estimates for 2007 and 2008, saying that like its peers, CSX would enjoy continued pricing power and margin improvements in the longer term as it further reduces costs.