Railroads Week In Review: Union Pacific, Norfolk Southern And CSX

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Except for a few conference announcements, it was largely an uneventful week for the railroad industry. Stock prices continued to rise through the week for all three railroads – Union Pacific (NYSE:UNP), Norfolk Southern (NYSE:NSC) and CSX (NYSE:CSX). We believe the stock market rally will continue driven by improving outlook for coal shipments and the growing intermodal business.

Norfolk Southern’s stock hits 52-week high

On September 4, Norfolk Southern’s stock hit a 52-week high of $109.22. It continued its momentum into the next day, ending at $109.55. Also in the past week, Norfolk Southern had announced that it will be holding its 2014 Investor and Financial Analyst Conference on Tuesday, September 23rd, where it present to analysts and investors its its operating, financial and strategic initiatives. Key here are the factors that will help continue it to drive growth. [1] We shall be covering the event and will bring to our readers the important takeaways from the conference.

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We currently have a price estimate of $88.27 for Norfolk Southern, 20% below its current market price. We estimate revenues of $11.94 billion and EPS of $6.46 for this fiscal year.

CSX will be presenting at UBS Conference

CSX recently announced that its Chief Financial Officer will be presenting at the UBS Best of Americas Conference Thursday, September 11. We believe that he will discuss recent updates and performance, as well as factors that support guidance.  We expect to see continued growth across all commodities, but will keep an eye out for its coal carloads, in particular. In the last quarter, weak export coal volumes more than offset the growth in domestic coal volumes, leading to a decline in coal revenue and revenue per unit.

We currently have a price estimate of $26.23 for CSX, 16% below its current market price. We estimate revenues of $12.52 billion and EPS of $1.80 for this fiscal year.

Union Pacific’s stock hits 52-week high

Union Pacific’s stock hit a 52-week high of $108.74 on September 4, but declined to $107.69 by the next day. We believe that economic growth and favorable change in Mexican energy reforms are driving positive sentiments for the company’s stock.

Union Pacific is facing a lawsuit over cleanup costs by Asarco, a mining operator. For its role in creating a Superfund site in the Coeur d’Alene River basin five year ago, Asarco had reached a $482 million settlement with the U.S. Environmental Protection Agency. A Superfund site is the name given to the environmental program established to address abandoned hazardous waste sites of great magnitude. It allows the EPA to clean up such sites and to compel responsible parties to perform cleanups or reimburse the government for EPA-lead cleanups. [2] Later on, Asarco sued the Union Pacific, claiming that the railroad was also responsible for the mining pollution and should foot part of the bill. Last week the 9th U.S. Circuit Court of Appeals said the case could go to trial.

We currently have a price estimate of $87.56 for Union Pacific, 19% below its current market price. We estimate revenues of $23.52 billion and EPS of $5.33 for this fiscal year.

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Notes:
  1. Norfolk Southern Announces 2014 Investor And Financial Analyst Conference, September 2, 2014, www.nscorp.com []
  2. EPA Superfund Basic Information, www.epa.gov []