Time To Buy Genesee & Wyoming

In a report published Tuesday, Citi analysts upgraded the rating on

from Neutral to Buy, with a price target of $114, following a nearly 10 percent pullback in the company's share price since mid-March. In the report Citi noted, "A negative 1Q preannouncement and concerns over commodity weakness and its impact on the Australian segment have pressured the stock, but we believe contribution from the Freightliner acquisition, which closed in late 1Q, will provide the next catalyst and leg of growth beginning in 2Q, muting concerns in Australia." Genesee & Wyoming is poised to benefit from the integration of Freightliner and the contribution from the company's major segments: Australia, North America and Europe. "In particular, we believe synergies could total $15 million in the first full calendar post integration and we believe the operating lease conversion opportunity over the next 3-5 years is large at ~$20m/year (assumes 2/3 own vs. lease). Collectively, we believe Freightliner contributes $80-90m in 2016 EBIT, driving 19% EPS growth in 2016," the analysts wrote. The EPS estimates for 2015, 2016 and 2017 have been reduced from $4.70 to $4.45, from $5.60 to $5.30 and from $6.30 to $6.00, respectively.