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Investing.com -- Wells Fargo upgraded CSX Corp to Overweight from Equal weight given new commercial agreements that are expected to bring more intermodal freight onto the railroad’s network just as industrywide volume growth slows.
The brokerage said the recently launched BNSF-CSX intermodal partnership is beginning to shift traffic away from Norfolk Southern, with JB Hunt as a likely beneficiary.
Wells Fargo estimated the realignment could eventually deliver about $375 million in annual intermodal revenue to CSX, with roughly $200 million of that materializing by 2026.
At the same time, CSX has completed two major construction projects, the Howard Street Tunnel in Baltimore and the Blue Ridge Subdivision, which had added about $10 million per month in extra operating costs.
Service is resuming ahead of schedule, improving productivity and setting the stage for double-stacked intermodal traffic through Baltimore once bridge clearances are lifted.
“Fundamentals have likely bottomed, and we see a path for low-to-mid-teens EPS growth in 2026 and 2027, stronger than the peer average,” Wells Fargo said. It raised earnings per share forecasts to $1.65 for 2025, $1.90 for 2026, and $2.15 for 2027.
The brokerage also noted CSX’s service metrics have recovered sharply since early 2025, with train velocity, terminal dwell and cars online all at their best levels in years.
Apart from operational improvements, Wells Fargo said CSX’s valuation could be supported by its role as the only remaining potential merger target in the eastern U.S. rail market if regulators approve the planned Union Pacific-Norfolk Southern tie-up.
CSX shares trade at about 17.5 times 2026 earnings, in line with the long-term average, but Wells Fargo said scarcity value and merger optionality justify a premium closer to 18.5 times.