Credit Suisse Announces Transport Preview with Top Ideas for Investors

In a report published Thursday, Credit Suisse analyst Allison Landry updated the third quarter “transport coverage universe” earnings.

Analyzing volume, air freight data, fuel prices, and mix trends, Landry raised estimates for Canadian National Railway CNI, CSX Corp CSX, and Norfolk Southern Corp NSC.

The analyst lowered estimates on Con-Way CNW, Kansas City Southern KSU, and J.B. Hunt Transport Services JBHT.

Credit Suisse noted three top ideas based “on actionable ideas/tactical investing opportunities ahead of the Q3 earnings season.” First, Landry recommended to buy shares of Con-Way ahead of the earnings report. Investor confidence is likely to increase based on Con-Way's consistent track record of execution.

The analyst suggested that this confidence has the ability to value shares in the mid $50s. This range would suggest a 25-30 percent upside potential. Landry lowered Q3 EPS estimate due to weak results from Truckload and Menlo from $0.70 to $0.64 versus consensus of $0.63.

The second top idea examined potential profits at CSX Corp. Credit Suisse announced that they expect solid earnings this quarter from CSX. The analyst mentioned a risk associated with 2014 earnings “as a result of an inventory overhang in the domestic coal franchise - which is likely to persist well into 2014.” Landry looked favorably at the near term profit resulting from strong Q3 earnings and raised Q3 EPS estimate from $0.41 to $0.43 (in line with the consensus).

Despite Kansas City Southern's disappointing volumes, Credit Suisse rounds its last top idea with the suggestion to hold onto shares in the long run. The analyst reported KSU's expected revenue to be up eight percent y/y, which is up two percent from Q2 and seven percent from Q1.

Landry commented, “Given the current negative sentiment heading into Q3 (short interest has spiked over the last few months to the highest level since Feb. 2011), we anticipate that if the company beats or even comes in line with consensus, (and does not temper its outlook for future growth prospects), the stock could finally breakout of its sideways-moving trend.”

Credit Suisse kept their EPS estimate of $1.13 which remains above the consensus of $1.10.