Norfolk Southern Earnings Warning Weighs on Rail Stocks

Wednesday's earnings warning from rail transport company Norfolk Southern NSC not only has its stock lower today, but it appears to have dragged down others in the industry as well. Of course, U.S. markets are lower in general today as well. The Norfolk, Virginia-based rail transportation company lowered its earnings per share (EPS) guidance for the third quarter to a range of $1.18 and $1.25. That compares to the consensus estimate of $1.64 per share, according to a poll by Thomson Reuters. The company posted $1.59 per share in the same period of last year. Shares fell as far as $65.58, or more than 9 percent, Thursday morning. Before this news, 18 of 28 analysts surveyed recommended buying shares. Their mean price target is now more than 21 percent higher than the current share price. The long-term EPS growth forecast is more than 13 percent, and the return on equity is about 19 percent. It also offers a dividend yield of about 2.7 percent. Canadian National Railway CNI pulled back as far as $89.33, or about 5 percent. By far, most of the 25 analysts polled recommend holding shares. Even after Thursday's drop, the current share price is higher than the mean price target. Still, the long-term EPS growth forecast is almost 13 percent, and the return on equity is more than 23 percent. The dividend yield is about 1.6 percent. Near mid-day, Canadian Pacific Railway CP dropped to $82.11 per share, which was about 3.5 percent lower. Only nine of 23 analysts polled recommend buying shares. Their mean price target is about the same as the current share price. The price-to-earnings (P/E) ratio is higher than the industry average, but so is the operating margin. The dividend yield is about 1.7 percent. Shares of CSX CSX dropped as far as $21.41, which was down almost 6 percent. The consensus recommendation was to buy shares. The mean price target of analysts is now about 18 percent higher than the share price. The return on equity is more than 21 percent. Short interest is less than one percent of the float. And the dividend yield is near 2.4 percent. Kansas City Southern KSU shares slipped to $75.60 in early trading. That was about four percent lower. Thirteen of the 21 analysts surveyed rate the stock at Buy or Strong Buy. Their mean price target is about four percent higher than the current share price. The long-term EPS growth forecast is more than 13 percent, and short interest is less than two percent of the float. The dividend yield is about one percent. Union Pacific UNP retreated as far as $120.32, or down more than 3.5 percent. Of the 28 analysts polled, 22 rate the stock at Buy or Strong Buy; none recommend selling shares. The mean price target is now more than 11 percent higher than the current share price. The long-term EPS growth forecast is more than 13 percent, and the return on equity is about 20 percent. It also has a dividend yield of about 1.9 percent.