Is this U.S.-China selloff a buy? A top Wall Street voice weighs in
Investing.com -- Despite a slowdown in U.S. rail volumes, certain railroad stocks show resilience in the current freight downturn, according to Jefferies.
Union Pacific stands out for its service metrics and productivity improvements. Despite facing headwinds in intermodal shipping, UNP maintains strong domestic intermodal business alongside solid coal and renewable energy volumes. The company’s network is operating at impressive efficiency levels, with record freight car velocity measures that should support a strong operating ratio below 60% in the third quarter.
Union Pacific recently reached ratified agreements with 11 unions and secured interim deals with two of its largest unions. The company also received continued positive sentiment from analysts, with BMO Capital and Bernstein reiterating Outperform ratings.
CSX Corporation benefits from accelerating volume growth and record service performance. With major infrastructure projects now completed and certain cost pressures diminishing, CSX is well-positioned for market share gains. Recent weeks have shown a surge in intermodal volumes, and new partnerships are expected to drive significant volume acceleration. Jefferies anticipates strong margin expansion and earnings growth for CSX in 2026.
CSX Corporation has appointed Steve Angel as its new President and CEO, replacing Joe Hinrichs. The company also reopened its Blue Ridge Subdivision freight line, a key corridor that was damaged by a hurricane one year prior.
Norfolk Southern faces challenges as its anticipated intermodal rebound failed to materialize. The company’s overall volumes remained flat, exposing it to cost and operating ratio pressures from higher headcount, IT expenses, and claims. While service performance remains strong, productivity gains have not fully offset cost inflation, likely resulting in sequential and year-over-year increases in operating ratio.
Norfolk Southern reported second-quarter adjusted earnings that fell short of consensus estimates and lowered its full-year revenue growth target. Following the results and an acquisition bid from Union Pacific, Benchmark downgraded the company to Hold.
Canadian National Railway shows disappointing volume performance both quarter-to-date and year-to-date. Particular weakness in forest products and metals segments has resulted in only modest overall volume growth. Persistent tariff headwinds are also affecting performance. While Jefferies notes CNI’s attractive valuation, the company’s near-term earnings growth is expected to lag behind industry peers.
In recent developments, Canadian National Railway has seen its price target lowered by BofA Securities and Bernstein. The company also announced the appointment of former LOGISTEC CEO Madeleine Paquin to its Board of Directors.
Canadian Pacific Kansas City despite its solid volume growth, faces tariff headwinds and increased costs from a major derailment. These factors are putting pressure on margins, making the achievement of full-year operating ratio targets dependent on a strong fourth-quarter rebound.
Canadian Pacific Kansas City announced it will not participate in further rail industry consolidation, stating it will instead focus on its existing North American network. The company also saw its price target raised by Stephens, while UBS lowered its third-quarter earnings per share estimate for the railroad.
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