Analysts at Goldman Sachs on Thursday resumed coverage on
several stocks in the Transports sector, offering a largely bullish
outlook for many major plays.
CSX Started as a "Buy"
The firm resumed coverage on railroad operator CSX Corporation (
CSX
) with a "Buy" rating and $25 price target, suggesting a 12% upside
to the stock's Wednesday closing price of $22.25.
A Goldman analyst commented, "With the bottom in domestic
utility coal very close, we see limited downside in the name and
believe the shares can work higher as investors shift focus to
non-coal segments which are performing well YTD. We think the
valuation discount to the group will narrow when the bottom in coal
materializes (likely a 3Q or 4Q event)."
Norfolk Southern also a "Buy"
Goldman also resumed coverage on railroad giant Norfolk Southern (
NSC
) with a "Buy" rating and $83 target, suggesting a 16% upside to
the stock's Wednesday closing price of $71.27.
The analyst commented, "We think the shares represent an
appealing combination of low-risk and meaningful reward in a slow
growth economy with the potential for significant returns to
shareholders from dividends (2.6% yield) and share repurchases (we
estimate 4-5% buyback in 2012 with bias to the upside). The company
should benefit from continued strength in intermodal truck
conversions and its petroleum segment, driven by increased Bakken
activity."
Bullish on FedEx, Too
The firm re-initiated coverage on package delivery giant FedEx
Corporation (
FDX
) with a "Buy" rating and $102 price target, suggesting an 11%
upside to the stock's Wednesday closing price of $90.61.
Goldman commented, "We believe the opportunity to rationalize
the Express segment will lead to faster-than-expected margin
expansion. The Ground business, where incremental growth is being
driven by the secular e-commerce story, should continue to
outperform and drive upside to Street estimates. History suggests
that investors have typically earned outsized gains in FDX stock
when buying the shares at current valuations."
"Neutral" on UPS with Possible Downside
Fellow package delivery service United Parcel Service, Inc. (
UPS
) was started as a "Neutral" at Goldman Sachs with a $77 price
target. That target implies a small downside to the stock's
Wednesday closing price of $78.88.
The analyst commented, "The valuation multiple on UPS shares
have been de-rating since the company went public in 1999 but we
believe the valuation should find support near current levels given
the high rate of return on equity generated by the business model.
At current valuations, however, we rate the shares Neutral and see
modest downside risk in the name."
Also "Neutral" on Union Pacific on Valuation
Concerns
Finally, Goldman restarted coverage on railroad operator Union
Pacific with a "Neutral" rating and $124 price target (6%
upside).
The analyst noted "The consensus favorite among rail stocks, we
think it is one of lowest risk names in the space with no exposure
to Appalachian coal and a 5% legacy book remaining that will
provide an annual lift to pricing growth of 50bps 100bps.
Valuation, however, keeps us from recommending the shares at
current levels."
The Bottom Line
Shares of CSX (
CSX
) have a 2.52% dividend yield, based on last night's closing stock
price of $22.25. The stock has technical support in the $19-$20
price area. If the shares can firm up, we see overhead resistance
around the $23-$24 price levels. Shares of Norfolk Southern (
NSC
) have a 2.64% dividend yield, based on last night's closing stock
price of $71.27. The stock has technical support in the $65 price
area. If the shares can firm up, we see overhead resistance around
the $75 price level. Shares of FedEx (
FDX
) have a .62% dividend yield, based on last night's closing stock
price of $90.61. The stock has technical support in the $85 price
area. If the shares can firm up, we see overhead resistance around
the $95-$97 price levels. Shares of United Parcel Service (
UPS
) have a 2.89% dividend yield, based on last night's closing stock
price of $78.88. The stock has technical support in the $73-$75
price area. If the shares can firm up, we see overhead resistance
around the $80-$81 price levels. Shares of Union Pacific (
UNP
) have a 2.06% dividend yield, based on last night's closing stock
price of $116.52. The stock has technical support in the $106-$110
price area. The stock is trading near all-time highs.
None of the dividend stocks mentioned in this article are
currently recommended by Dividend.com.
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Best Dividend Stocks
, as well as a detailed explanation of
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