Railroad stocks and rail operators are seen as indicators for the broader economy, since more freight moves across America via freight trains as consumers buy more and businesses ship more. Leading railroad stocks include Union Pacific (UNP), CSX Corp. (CSX) and Norfolk Southern (NSC), but smaller rail operators are affected similarly.
A look at the numbers show that railroad stocks are booming right now. All of the major players are sitting on a positive return so far in 2010 despite a small decline in the broader market, and all stocks have significant upside potential based on Thomson/First call price estimates. In fact, even the lowest estimate among Wall Street brokers covering the major railroad stocks listed here is above current valuations – with the highest estimate for some projecting an upside of as much as +70%!
That points to bullish signs for the rail sector, and profits for investors who jump into railroad stocks right now. To help you get your share, here are six major rail players and their current average price target:
Union Pacific (UNP): With headquarters in Omaha, Neb., Union Pacific (UNP) lays claim to being the largest railroad network in the United States – in size and scope. The company is second only to the United States government in overall landholdings in the United States and the largest landholder west of the Mississippi River. UP’s chief railroad competitor is the BNSF Railway, which covers much of the same territory. Wall Street notes an average price target of about $86 per share for UNP stock, according to Thomson/First Call, which would be about +26% above current valuations. . What’s more, even the lowest price estimate among the 24 brokers following UNP stock ($80) is more than +16% above current pricing! Union Pacific is up +7.5% year-to-date, noticeably better than the -2.5% return for the Dow and -3.8% lost by the S&P 500 index.
CSX Corp. (CSX): In 1980, a merger of Chessie System and Seaboard Coast Line Industries became known as CSX Transportation (CSX). Based in Jacksonville, Fla., its non-railroad interests have in the past included barge lines, pipelines, and containerships. At present it operates a worldwide network of shipping terminals as well as freight and information technology services. Thomson/First Call shows an average price target of $66.50 per share – a full +32% above current pricing of about $50 a share. CSX Corp. has already notched a +2% gain year-to-date, compared to a loss in the broader stock market.
Norfolk Southern (NSC): The holding company for the Norfolk Southern Railway, a major Class I railroad system with headquarters in Norfolk, Va., Norfolk Southern (NSC) operates some 21,500 miles in 22 states in the eastern U.S., the District of Columbia and the province of Ontario, Canada. Its commonly hauled commodity is coal from mines in Kentucky, Pennsylvania, Tennessee, Virginia, and West Virginia. NSC is listed as a having an average price target of about $67 per share according to Thomason/First Call, about +26% above current pricing. Norfolk Southern shares have been pretty flat year-to-date with a small gain, but have fared better than Wall Street as a whole.
Kansas City Southern (KSU): The smallest and second-oldest Class I railroad company in operation, Kansas City Southern (KSU) was founded in 1887 and currently operates in 10 central U.S. states. KSU owns and indirectly operates Kansas City Southern de México (KCS) in the central and northeastern states of México, and is the only Class I Railroad to own any track both inside and outside of Mexico’s boundaries. KSU stock has an average price target of about $48 per share on Wall Street according to Thomson/First Call, a hefty +37% above current stock valuations. Kansas City Southern is up +2.8% year-to-date, significantly better than the -2.5% for the Dow and -3.8% lost by the S&P 500 index.
Canadian National Railway (CNI): Headquartered in Montreal, Quebec, Canadian National Railway (CNI) is the largest railway in Canada, in revenue and size of its rail network. It’s Canada’s only transcontinental railway company, spanning about 20,400 route miles of track in eight provinces. With its purchase of Illinois Central and other smaller U.S. railways it added extensive trackage in the central states along the Mississippi River valley from the Great Lakes to the Gulf of Mexico. Wall Street notes an average price target of about $68 per share, as Thomson/First Call notes. That’s about +15% above current pricing of $59 for CNI stock. Canadian National Railway is up +8% year-to-date, far above the -2.5% for the Dow and -3.8% lost by the S&P 500 index.
Trinity Industries (TRN): Not your typical railroad stock, Trinity Industries (TRN) provides product and services to many of the aforementioned rail stocks. Though TRN also does business in the industrial, energy and construction sectors, its leasing and sales of rail cars are its primary source of revenue. According to Thomson/First Call, TRN has an average Wall Street price target of about $31 per share, which could present a good buying option with a massive upside of +70% over current share valuation at $18 for TRN stock. Trinity is up +3% year-to-date, above the -2.5% for the Dow and -3.8% lost by the S&P 500 index.
As of this writing, Burke Speaker did not own a position in any of the stocks named here
GameChanger Stocks to Build Your Wealth. GameChangers are companies that rewrite the rules, revolutionizing the way we live and thrive. Companies like Apple and Dendreon. Their business breakthroughs delivered handsome profits for savvy investors who got in early. Discover the next generation of GameChangers you should be buying now. Download your FREE copy of Hilary Kramer’s new report here.
