CSX, Norfolk Southern upgraded to ‘Buy’ at Stifel amid attractive valuations
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Rail stocks have been on a ride lower in 2022, but Stifel analyst Benjamin Nolan indicated the names may have fallen farther than they deserve in a note on Friday.
The note pointed to the 2006-2009 cycle as a contrasting point, with the rail freight market remaining far more elastic in the prior period. Additionally, demand remains stronger with valuations likely to hold up better than in the prior recession, especially as higher fuel prices drive share gains over trucking.
As such, the recent selloff in rail stocks is overdone for many of the names, in Nolanâs view.
âRail equities have re-rated and are now at much more attractive multiples relative to what had been anticipated,â he wrote. âWhile we are generally making cuts to estimates on lower growth and higher [operating ratios], given the substantial selloff in equities and our view for a modest recession impact on the rails, we are upgrading some of the cheapest names.â
 The cheapest names pinpointed by the firm included CSX Corp. (NASDAQ:CSX) and Norfolk Southern (NYSE:NSC), which were upgraded from âHoldâ to âBuyâ. Still, price targets were trimmed on both names, with Nolan taking his target from $39 to $37 for CSX Corp. (CSX) and took Norfolk Southern (NSC) from $289 to $275 based upon understood macro pressures.
âWe admittedly might be a little early on upgrading CSX and NSC and there could be some risk to estimates if market conditions were to meaningfully deteriorate,â Nolan acknowledged. âBut given current pricing we believe downside should be limited and if as we expect things are not as bad as the market fears for the two East Coast rails.â
Elsewhere, price targets for Union Pacific (UNP), Canadian Pacific Railway (CP), and Canadian National Railway (CNI) were all reeled in. Each of the names was rated âHoldâ in contrast to CSX and NSC.
Price target changes:

Union Pacific (UNP): $254 â $225
CSX Corp. (CSX): $39 â $37
Norfolk Southern (NSC): $289 â $275
Canadian Pacific (CP): $79 â $78
Canadian National Railway (CNI): $124 â $113

Read more on earnings estimates for Union Pacific.