Norfolk Southern stock decelerates as Baird downgrades to Neutral
J. Michael Jones/iStock Editorial via Getty Images

Norfolk Southern (NYSE:NSC) shares fell on Friday as Baird analyst Garrett Holland reduced his rating on the name to âNeutralâ from a prior âOutperform.â
He explained that earnings estimates have further to fall ahead of the railroad operator's quarterly report later this month as macroeconomic conditions trend negatively.
âGiven continued deterioration in the macro outlook, we outline earnings power for our coverage in bear and severe bear macro scenarios and estimate ~10%-20% EPS downside in these environments, respectively,â Holland explained. âRail and LTL names screen as having most downside and trade with larger valuation premiums on pro forma earnings. Consistent with conclusions from this analysis, we are downgrading NSC to Neutral.â
He added that the bear case is looking increasingly likely, making rail a less attractive space. Alongside the downgrade of Norfolk Southern (NSC), Holland reduced his price target from $280 to $240. He also cut his price target on Union Pacific (UNP) from $255 to $228 and CSX Corp. (CSX) from $37 to $34 amid the adverse macro expectations.
Instead, Holland advised investors to look elsewhere in the transport sector. 
âTruckload names offer the best risk/reward, in our view, and already appear to discount a severe recession,â he concluded.
Hub Group (HUBG), Schneider National (SNDR), Werner Enterprises (WERN), and Knight-Swift Transportation Holdings (KNX) were cited as stocks presenting this better risk/reward dynamic. 
Read more on recent rail traffic trends.