Wells Fargo Upgrades Norfolk Southern (NSC) to Outperform

February 3, 2014 7:02 AM EST
Get Alerts NSC Hot Sheet
Price: $113.59 -0.73%

Rating Summary:
    12 Buy, 19 Hold, 6 Sell

Rating Trend: Down Down

Today's Overall Ratings:
    Up: 30 | Down: 30 | New: 23
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Wells Fargo upgraded Norfolk Southern (NYSE: NSC) from Market Perform to Outperform with a price target of $101-$104 (unchanged). Analyst Anthony P. Gallo sees lower costs and manageable risks.

"We are upgrading the shares of NSC to Outperform from Market Perform with unchanged ests and a 6-12 month valuation range of $101-104. On 1/22/14 following the Q4 2013 earnings report, we raised our ests (2014E to $6.52 from $6.40 and 2015E to $7.46 from $7.20) and valuation range (from $97-101). The other Class 1 Railroads have subsequently reported 2013 results and we find NSC's better-than-peer performance on expense control appealing. In turn, we think this expense performance coupled with a modest improvement in volumes provides improved earnings visibility. Lastly, we think downside EPS risk from further deterioration in coal or potential adverse crude-by-rail regulations will not be material, all else being equal. Conversely, we see upside potential to ests if domestic utility coal were to rebound from more accommodating weather or gas-to-coal switching. With improved earnings visibility via the expense structure, manageable downside earnings risks, attractive valuation and 2%+ dividend yield, we now rate the shares Outperform," said Gallo.

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 $92.59 yesterday.

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