Goldman On Transportation

Goldman Sachs has issued a report on America's Transportation industry. In the report, Goldman writes "We expect railroad results to be mixed following more broad-based industry strength in recent quarters—as companies begin to bring assets/costs back on line to support increased volumes. For 3Q2010 we expect: *In-line results for CSX (Sell) and NSC (Neutral), which may not be enough given recent quarterly beats and high expectations due to volume strength this quarter. *Positive risk-reward for UNP (Neutral), with the largest upside versus consensus expectations given improved pricing trends. *Any weakness in CP (CL-Buy) is a buying opportunity, given that they likely faced currency and compensation (higher share price) headwinds in 3Q. CP remains our favorite railroad name given attractive bulk commodity exposure (met coal, potash), a margin catch up opportunity, and improving pricing trends. Our channel checks suggest average 4-5% yoy base rate increases across trucking. This should more than offset spot market business that has started to soften after a surge in 2Q. *Positive short-term risk-reward for CNW (Neutral): We see a positive stock setup given low investor expectations for 3Q, and the potential for improved LTL pricing expectations for 4Q. *Remain on the sidelines for JBHT (Neutral): We continue to view JBHT favorably longer-term, however, we remain on the sidelines given: (1) our expectation for more consistent intermodal pricing to increase less than truckload, (2) increased costs and unfilled backhauls associated with new intermodal business could pressure near-term margins, and (3) valuation." Companies related to this report include: Air Freight: United Parcel Service

CL-Buy $67.88 $81 FedEx Corp.

Neutral $87.83 $95 Railroads: Union Pacific

Neutral $82.42 $92 Norfolk Southern

Neutral $59.51 $59 CSX Corp.

Sell $56.06 $53 Kansas City Southern

Neutral $38.32 $43 Canadian Pacific

CL-Buy C$63.04 C$75 Trucking: CH Robinson

Sell $70.89 $56 JB Hunt Transport

Neutral $34.99 $39 Con-way Inc.

Neutral $30.88 $31 Learn how to find the best

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