Why Wall Street Has a ‘Buy’ Mandate for Genesee & Wyoming
Analysts’ views on GWR
In this final part of our Genesee & Wyoming (GWR) 2Q17 post-earnings series, we’ll turn to Wall Street analysts. There are 12 analysts covering GWR. Of those, five analysts (or 42.0%) have a “strong buy” opinion on GWR stock. Two analysts (or 16.0%) have a “buy” recommendation for the stock. Five analysts (or 42.0%) have advised investors to “hold” the common shares of GWR.
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Analysts’ 12-month price target
Genesee & Wyoming (GWR) has a 12-month consensus target price of $74.20 from Reuter-surveyed analysts. Based on a closing price of $66.60 on August 3, 2017, that translates to a return potential of 11.4%. GWR stock returned a mere 3.0% in the last year. Let’s look now at analysts’ target prices for the peer group:
- Union Pacific (UNP): $119 with a return potential of 16.1%
- CSX (CSX): $57.90 with a return potential of 17.6%
- Norfolk Southern (NSC): $124.40 with a return potential of 9.6%
- Kansas City Southern (KSU): $111.60 with a return potential of 9.4%
- Canadian Pacific (CP): $225.60 Canadian with a return potential of 15.1%
- Canadian National Railway (CNI): $105.60 Canadian with a return potential of 5.4%
GWR forms part of the First Trust Industrials/Producer Durables AlphaDEX Fund (FXR), which invests 1.5% of its holdings in GWR stock. FXR’s overall exposure to transportation stocks, which include airlines, trucking, and railroads, is 25.0%.
Why a ‘buy’ on GWR?
Genesee & Wyoming has a long history of acquisitions of Class II and Class III railroads. Management has effectively integrated the acquired operations in the past, which has been accretive to GWR’s earnings per share. The recently acquired railroads should add to the company’s top line and margins going forward.
Segment-wise, its North American business looks stable although flat on a year-over-year basis. However, investors might witness operating margin improvements on that front with the volume rise and pricing gains. The company has addressed the weakness in its UK-Europe business through restructuring, which seems to be on track.
Overall, the improvement in energy commodity prices should result in more volumes for the company in 2017. That, in turn, will push up its earnings in the coming quarters.