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How Major US Railroads Fared in 2Q17

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Part 11
How Major US Railroads Fared in 2Q17 PART 11 OF 11

What Analysts Recommend for US Railroads

Analysts’ recommendations for UNP and KSU

Union Pacific (UNP) has a consensus analyst rating of 2.28, indicating a “buy.” Out of the 29 analysts tracking the stock, six analysts gave it a “strong buy” rating while nine analysts advised a “buy.” The remaining 14 analysts have a “hold” opinion. The company’s 12-month average price target is $119, reflecting a return potential of 9.3%.

Kansas City Southern (KSU) has an analyst consensus rating of 2.4, or a “buy.” Of the 19 analysts covering KSU, three have a “strong buy,” while five gave it a “buy.” The remaining 11 analysts have a “hold” opinion. KSU’s average 12-month price target is $112.3, indicating a return potential of 5.8%.

What Analysts Recommend for US Railroads

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Analysts on Eastern US railroads

Norfolk Southern (NSC) has a Thomson Reuters analyst consensus rating of 2.6, or “hold.” Out of the 27 analyst recommendations, five advised a “strong buy,” whereas four gave it a “hold.” 16 analysts have a “hold” opinion on NSC. Two analysts suggest a “sell” on the company’s stock. NSC’s average 12-month price target is $124.4, which indicates a negative return potential.

CSX (CSX) has a consensus rating of two, or a “buy.” Of the 27 analysts tracking CSX, seven analysts gave it a “strong buy” recommendation, while 13 advised a “buy.” The remaining seven analysts have a “hold” opinion on CSX stock. The company’s average 12-month price target is $57.4 per share, translating into a return potential of 10.4%.

Analysts’ take on CNI and CP

Canadian National Railway (CNI) has an analyst consensus rating of 2.75, or “hold.” Of the 20 analysts tracking the company, five analysts advise a “buy,” while 15 gave it a “hold.” Based on a 12-month price target of $106.3 Canadian dollars, the target implies a return of 6.8%.

Canadian Pacific Railway (CP) has a consensus rating of two, or “buy.” Out of the 24 analyst recommendations, six gave it a “strong buy,” and 12 gave it a “buy” opinion. The remaining six analysts suggest a “hold” on the company. CP’s average 12-month price target is $223.6 Canadian dollars, indicating a return potential of 14% over the next 12 months.

Genesee & Wyoming (GWR) has a consensus rating of two, or “buy.” Of the 12 analysts tracking the company, five gave it a “strong buy,” two have a “buy” opinion, and the remaining five gave it a “hold.” Major US railroads make up 25.6% of the iShares Transportation Average ETF (IYT).

Analysts’ view of the railroad sector

With the freight volume situation improving year-over-year in 2017, the earnings prospects for railroads have improved. The overall shift in analysts’ opinion on these US railroads suggests an optimistic outlook towards railroads. However, investors should note that sustainability of increased coal revenues is more dependent on alternative fuel prices and state policies.

Even intermodal, a key segment for railroads, hasn’t picked up considerably in 2017. The scrapping of TPP (Trans Pacific Partnership) and the renegotiation of NAFTA (North Atlantic Free Trade Agreement) could add to the worries of the already beleaguered railroad sector.

For more updates on the US railroad sector, please visit Market Realist’s railroads page.

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