Genesee & Wyoming (GWR) has a consensus stock rating of 2.21, indicating a “buy.” Of 14 analysts tracking GWR stock, four (29.0%) gave “strong buy” recommendations. Three (21.0%) analysts recommended a “buy,” and seven (50.0%) analysts gave “hold” recommendations on GWR stock.
Analysts’ price targets
Genesee & Wyoming (GWR) received a 12-month target price of $88.85 from analysts surveyed by Thomson Reuters. This resulted in a negative return potential based on the stock’s closing price of $91.01 on September 20. The company’s stock returned 24.6% in the last year. Let’s look at the peer group’s return potential:
- Kansas City Southern (KSU) has a target price of $125.88 with a return potential of 6.15%.
- Union Pacific (UNP) has a target price of $162.12 with a return potential of -1.2%.
- Norfolk Southern (NSC) has a target price of $177.48 with a return potential of -3.7%.
- CSX (CSX) has a target price of $75.05 with a return potential of 2.7%.
- Canadian Pacific Railway (CP) has a target price of 270.26 Canadian dollars with a return potential of 1.05%.
- Canadian National Railway (CNI) has a target price of 117.74 Canadian dollars with a return potential of 3.6%.
Investors who are bullish about transportation stocks may consider investing in the iShares US Industrials ETF (IYJ). This ETF has ~7.2% weight in major US railroad companies.
Why analysts are divided on GWR
Among all the major US railroads, Genesee & Wyoming (GWR) has a sizable exposure outside the United States. So, the company is the smallest beneficiary of the country’s lower tax rates. The company’s operating performance in Europe depends on the Brexit deal. The US–China trade conflict is expected to affect GWR more than other US railroads.
GWR receives 25.0%–30.0% of its revenues from its European operations, and it lost substantial coal business in that region. Investors should keep a close eye on GWR’s United Kingdom operations where a large-scale restructuring is underway.
With respect to its balance sheet, the company has reduced its adjusted net-debt-to-EBITDA multiple from 3.7x to 2.8x in the last two years. Lower taxes have boosted GWR’s adjusted free cash flow by ~30.0% in the last year.
Overall, the company’s earnings are expected to gain from the synergies of recent acquisitions and lower taxation. However, uncertainties remain for its European turnaround and the present trade tensions between the United States and China.