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Deutsche Bank Initiates Coverage on RailAmerica (RA) with a Buy; Strong Upside Potential

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November 23, 2009 6:53 AM EST

Deutsche Bank initiates coverage on RailAmerica (NYSE: RA) with a Buy. Price target $17.

Deutsche analyst says, "We believe RailAmerica stands to benefit from positive railroad industry trends such as improving volumes in a recovering economy and stable pricing which should drive strong operating leverage. In addition, RailAmerica continues to improve the profitability of its 40 railroads and drive non-freight revenue growth. We expect earnings and returns to improve. We see strong upside potential at RailAmerica...We believe RailAmerica is poised to benefit from significant margin improvement as management continues to improve the core profitability of its various short line and regional railroads and continues to grow its high-margin non-freight revenue...Moreover, our sense is that longer-term further OR opportunity exists due in part to its non-freight revenue opportunities (which come with much higher margins) and its potential to wring-out further operational efficiencies at its railroad properties."

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