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Fly News Breaks for October 23, 2019
NSC, CSX, KSU, UNP, CNI
Oct 23, 2019 | 15:35 EDT
BofA/Merrill analyst Ken Hoexter downgraded Norfolk Southern (NSC) to Neutral from Buy with an unchanged price target of $198. The benefits from its Precision Scheduled Railroad, or PSR, implementation are not materializing as fast as he expected and the company said it would not reach its 100 basis point operating ratio improvement target in 2019, although it reiterated confidence in achieving a 60% operating ratio by 2021, said Hoexter. Norfolk Southern's 63.8% operating ratio, when adjusted for the 110 basis points negative impact of a write-off of a receivable resulting from a legal dispute, compares with CSX (CSX) at 59.0% ex-real estate gains, Kansas City Southern (KSU) at 60.7%, Union Pacific (UNP) at 59.5%, and Canadian National (CNI) at 57.9%, Hoexter pointed out.
News For NSC;CSX;KSU;UNP;CNI From the Last 2 Days
KSU
Dec 11, 2019 | 09:13 EST
Loop Capital analyst Rick Paterson raised his price target on Kansas City Southern to $169 and kept his Buy rating, citing the benefits of the company potentially securing access to its "long sought after" port of Veracruz on Mexico's east coast in the first half of next year. The analyst notes that the achievement would give company access to the newly constructed double-track, adding that in its current state, Veracruz is top-ranked for automotive traffic in Mexico. Paterson further notes that Kansas City Southern's market share can only rise, estimating 36bp gain in total volume for every 1% of share taken from Veracruz port traffic.
CSX
Dec 10, 2019 | 10:18 EST
Catch up on today's top five analyst downgrades with this list compiled by The Fly: 1. Netflix (NFLX) downgraded to Underperform from Hold at Needham with analyst Laura Martin saying the streaming has consistently stated it will not have advertising, which will result in U.S. subscriber losses. 2. JPMorgan (JPM) downgraded to Market Perform from Outperform at Keefe Bruyette with analyst Brian Kleinhanzl saying JPMorgan has been a strong performer in 2019 and remains best in class in terms of quality, but investors should own stocks where consensus earnings estimates have the potential to rise. 3. McCormick (MKC) downgraded to Sell from Neutral at Goldman Sachs with analyst Adam Samuelson saying with the shares having substantially outperformed peers over the past two years, rallying 63% versus the peer group at 5%, and valuation at or near all-time highs on both an absolute and relative basis, McCormick's risk/reward "appears uncompelling absent a notable acceleration in underlying revenue growth which appears unlikely." 4. CSX (CSX) downgraded to Neutral from Buy at Citi with analyst Christian Wetherbee saying CSX has been a "great turnaround and earnings growth story" over the last three years, but as headwinds build in 2020, there is "real risk" to year-over-year earnings growth. 5. Ventas (VTR) downgraded to Underperform from Market Perform at Wells Fargo with analyst Todd Stender saying he appreciates the REIT's diversification across medical office, life science, and hospitals, but he expects its senior housing exposure which accounted for 57% of revenue in the most recent quarter to determine share performance. This list is just a portion of The Fly's full analyst coverage. To see The Fly's full Street Research coverage, click here.
CSX
Dec 10, 2019 | 06:46 EST
75Citi analyst Christian Wetherbee downgraded CSX to Neutral from Buy with a price target of $75, down from $80. CSX has been a "great turnaround and earnings growth story" over the last three years, but as headwinds build in 2020, there is "real risk" to year-over-year earnings growth, Wetherbee tells investors in a research note. While export coal has grabbed the most attention recently, broader volume weakness and a diminishing well of cost takeout opportunities suggests CSX's revenue and EBIT falls next year, says the analyst. He believes the company's near best in class free cash flow may not be enough to push shares higher.