On Mar 19, we upgraded our recommendation on
Norfolk Southern Corp.
) to Neutral from Underperform, owing to driving factors such as
superior service and network capabilities, infrastructural
investments, and accelerated growth in intermodal and merchandize
segments on the back of strong freight pricing. However, several
headwinds such as regulatory issues and competitive pressures
along with the downturn in coal and crop markets will likely
limit the upside potential over the near term. The transportation
company holds a Zacks Rank #3 (Hold).
Why the Upgrade?
We believe that Norfolk Southern is well poised to benefit from
strong pricing momentum owing to growing market demand and
shortage in truckload transportation. We remain highly optimistic
on the company's growth across segments - Merchandize and
Intermodal. In the coming months, higher shipments of crude oil,
better conditions in the housing and construction markets as well
as stability in the steel sector will continue to be the prime
growth drivers for the Merchandize segment.
Going forward, consistent expansion prospects for highway
conversion, new Intermodal service lanes, business opportunities
with shipping partners across the globe and development of the
premium market segment are expected to support Intermodal's
performance level. With a number of intermodal terminals under
construction, the business prospects of the company look
appealing. The opening up of these new terminals are expected to
bring new additional business for the company and foster its
Other supporting factors Norfolk Southern - that operates along
) - include planned investment programs and various cost-saving
initiatives. With a healthy financial profile and a commitment to
enhance shareholders' value, Norfolk Southern is likely to be
preferred by investors.
Other Stocks to Consider
Other stocks worth considering within the sector are
Canadian Pacific Railway Limited
Kansas City Southern
) that hold a Zacks Rank #2 (Buy rating).
CDN PAC RLWY (CP): Free Stock Analysis Report
CSX CORP (CSX): Free Stock Analysis Report
KANSAS CITY SOU (KSU): Free Stock Analysis
NORFOLK SOUTHRN (NSC): Free Stock Analysis
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