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CSX

CSX

$52.93

-4.38 (-7.64%)

, CP

Canadian Pacific

$179.01

0.33 (0.18%)

13:12
12/18/17
12/18
13:12
12/18/17
13:12

CSX CEO death raises questions about strategy, M&A potential

Shares of CSX (CSX) are off their worst levels of the session and trading fractionally higher following the death of the company's CEO over the weekend. While the news prompted a stock downgrade to Hold at TD Securities, JPMorgan analyst Brian Ossenbeck argued that Hunter Harrison's legacy will continue at CSX and that he sees downside in the stock being limited. Meanwhile, Cti analyst Christian Wetherbee pointed out that the death of the company CEO may increase the likelihood of a merger with Canadian Pacific (CP). MOVING TO THE SIDELINES: Following the unexpected medical leave of absence and subsequent death of CEO Hunter Harrison, TD Securities downgraded CSX to Hold from Buy and lowered its price target on the shares to $54 from $63. The firm argued that senior management now lacks a member with an operating background. LIMITED DOWNSIDE: Meanwhile, JPMorgan's Ossenbeck told investors that he believes Hunter Harrison's legacy will continue at CSX, reiterating an Overweight rating and $63 price target on the shares. The analyst said he estimates downside in the stock to be limited to $45-$48 based on his below consensus forecasts, with U.S. tax reform and a "tighter truck market" providing positive near-term catalysts. Nonetheless, Ossenbeck acknowledged that the lack of a defined management succession plan remains a near-term hurdle for CSX, and will not likely be addressed until the investor day in first quarter of 2018. Voicing a similar opinion, Baird analyst Benjamin Hartford said he believes the shares should find support in the $48-$50 level, which is where shares traded during previous periods of transition for the company. While Hunter Harrison's passing "undoubtedly" introduces incremental risk and uncertainty to the trajectory of CSX's operating ratio improvement, and it is even more so a "show-me" story given the absence of his leadership, Hartford noted that the PSR model has been put into place, the company employs the talent needed to execute the plan, and there is no reason to diminish CSX's expectations regarding the pace and magnitude of future progress. He reiterated an Outperform rating and $58 price target on the shares. MERGER WITH CANADIAN PACIFIC: In a research note of his own, Citi's Wetherbee told investors that he believes the death of Harrison may increase the likelihood of CSX attempting to merge with Canadian Pacific. However, the analyst noted that he is not sure a deal could be accomplished due to elevated regulatory risk. A "large portion of the heavy lifting" related to the start of CSX's turnaround occurred in 2017, allowing 2018 to be a year focused on executing, he contended, adding that he still believes in the company's long-term potential. Wetherbee also pointed out that he sees Jim Foote as capable of executing Hunter's vision, while noting that CSX's board could move to add seasoned executives in the coming months. The analyst reiterated a Buy rating and $58 price target on the shares. PRICE ACTION: In afternoon trading, shares of CSX are fractionally up to about $53 per share.

CSX

CSX

$52.93

-4.38 (-7.64%)

CP

Canadian Pacific

$179.01

0.33 (0.18%)

  • 18

    Jan

CSX CSX
$52.93

-4.38 (-7.64%)

12/18/17
BARD
12/18/17
NO CHANGE
Target $58
BARD
Outperform
CSX shares should find support in $48-$50 level after CEO passing, says Baird
Baird analyst Benjamin Hartford noted the passing of CSX CEO Hunter Harrison and believes the shares should find support in the $48-$50 level, which is where shares traded during previous periods of transition for the company. While acknowledging his death adds incremental risk to the shares, Hartford maintained his Outperform rating and $58 price target on CSX.
12/18/17
JPMS
12/18/17
NO CHANGE
Target $63
JPMS
Overweight
CSX downside limited to $45-$48 per share, says JPMorgan
JPMorgan analyst Brian Ossenbeck believes Hunter Harrison's legacy will continue at CSX. The analyst reiterates an Overweight rating on the shares with a $63 price target following his death. He estimates downside in the stock is limited to $45-$48 based on his below consensus forecasts, with U.S. tax reform and a "tighter truck market" providing positive near term catalysts. CSX in premarket trading is down 2% to $51.61. The lack of a defined management succession plan remains a near term hurdle for CSX, however, and will not likely be addressed until the investor day in Q1 of 2018, Ossenbeck tells investors in a research note.
12/18/17
12/18/17
DOWNGRADE
Target $54

Hold
CSX downgraded to Hold from Buy at TD Securities
As previously reported, TD Securities downgraded CSX to Hold and cut its price target on the stock to $54 from $63 following the unexpected medical leave of absence and subsequent death of CEO Hunter Harrison, saying senior management now lacks a member with an operating background.
12/18/17
12/18/17
DOWNGRADE

On The Fly: Top five analyst downgrades
Catch up on today's top five analyst downgrades with this list compiled by The Fly: 1. CSX (CSX) downgraded to Hold from Buy at TD Securities with the firm citing the unexpected medical leave of absence and subsequent death of CEO Hunter Harrison, saying senior management now lacks a member with an operating background. 2. PG&E (PCG) downgraded to Market Perform from Outperform at Wells Fargo with analyst Neil Kalton saying he sees "significant uncertainty" given the Northern California wildfires in mid-October and also highlights some recent adverse regulatory developments. 3. Oclaro (OCLR) downgraded to Hold from Buy at Needham with analyst Alex Henderson contending that consensus 2018 estimates look too high given the company's limited growth visibility. 4. Engility (EGL) downgraded to Hold from Buy at Drexel Hamilton with the firm saying peers will benefit from a lower tax rate and shares will have a difficult time outperforming the group. 5. Euronet (EEFT) downgraded to Market Perform from Outperform at William Blair. This list is just a portion of The Fly's full analyst coverage. To see The Fly's full Street Research coverage, click here.
CP Canadian Pacific
$179.01

0.33 (0.18%)

11/01/17
DBAB
11/01/17
INITIATION
Target $73
DBAB
Sell
Canadian National initiated with a Sell at Deutsche Bank
Deutsche Bank analyst Seldon Clarke started Canadian National (CNI) with a Sell rating and $73 price target. The analyst sees 10%-plus downside in the shares as the company's "strong outperformance starts to slow." The analyst expects "catch-up performance" from Canadian Pacific (CP), which he initiated with a Buy rating.
11/13/17
GSCO
11/13/17
INITIATION
Target $178
GSCO
Neutral
Canadian Pacific initiated with a Neutral at Goldman Sachs
Goldman Sachs analyst Matt Reustle initiated Canadian Pacific with a Neutral rating and $178 price target. The analyst started the Rails sector with a Cautious coverage view and the Airfreight/Logistics sector with an Attractive coverage view.
12/15/17
SBSH
12/15/17
NO CHANGE
Target $58
SBSH
Buy
Citi recommends buying CSX on today's selloff
Citi analyst Christian Wetherbee recommends using the selloff today in shares of CSX (CSX) as a buying opportunity. At Canadian Cacific (CP), Hunter Harrison needed 18 months to do the heavy lifting on the company's operational turnaround, Wetherbee tells investors in a research note. Harrison has worked for 10 months at CSX before his medical leave and the question is whether that is enough to successfully pass the reigns to Jim Foote to execute his vision, Wetherbee contends. Most of what needed to be done at CSX has already been done, the analyst contends, pointing out that CSX was in a better place than CP was in 2012 what Harrison took over. Wetherbee still thinks fair value for CSX shares is in the upper $50s excluding tax benefits, and upper $60s with tax reform. He keeps a Buy rating on the stock with a $58 price target. CSX is down 8%, or $4.34, to $52.97 in morning trading.
12/18/17
SBSH
12/18/17
NO CHANGE
Target $58
SBSH
Buy
Harrison death may lead to CSX looking at Canadian Pacific merger, says Citi
The death of CEO Hunter Harrison may increase the likelihood of CSX (CSX) attempting to merge with Canadian Pacific (CP), Citi analyst Christian Wetherbee tells investors in a research note titled "The Passing of a Legend." The analyst, however, is not sure a deal could be accomplished due to elevated regulatory risk. Wetherbee thinks a "large portion of the heavy lifting" related to the start of CSX's turnaround occurred in 2017, allowing 2018 to be a year focused on executing. He still believes in the long-term potential of CSX. Jim Foote is capable of executing Hunter's vision, and CSX's board could move to add seasoned executives in the coming months, Wetherbee contends. He keeps a Buy rating on CSX with a $58 price target. The stock in premarket trading is down 2% to $51.62.

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