UPDATE: UBS Starts Norfolk Southern (NSC) at Buy

(Updated - October 14, 2014 9:34 AM EDT)

UBS initiated coverage on Norfolk Southern (NYSE: NSC) with a Buy rating and a price target of $130. Analyst Thomas Wadewitz thinks leverage to a favorable rail pricing cycle supports upside for EPS.

"Although NSC has been a strong stock in 2013 and 2014, current P/E valuation of 13.5x on our 2015 EPS estimate is reasonable. We believe there are clear supports for EPS growth in 2015 / 2016. A tight truckload market supports growth in intermodal, energy activity drives growth in crude by rail and frac sand volume, and cyclical improvement in automotive and housing support volume growth. We expect tight rail and truckload markets to support stronger rail pricing in 2015 which should also translate to margin expansion and mid-teens or better EPS growth. While NSC stock reflects at least some of the good news, earnings growth in 2015 and 2016 should support further upside," said Wadewitz.

For an analyst ratings summary and ratings history on Norfolk Southern click here. For more ratings news on Norfolk Southern click here.

Shares of Norfolk Southern closed at $103.21 yesterday.

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