Strong third quarter results at CSX Corp. (NYSE:CSX) led UBS to hike its earnings estimates and price target on the company, while the firm also noted that a push by activist investors is likely a good thing for the railroad.
Analyst Rick Paterson boosted his estimates for 2008 and 2009 on favorable pricing and an operational recovery, while his price target jumped US$4 to US$53.
Meanwhile, London-based investment manager The Children’s Investment Master Fund [TCI] criticized the way the company approaches executive compensation and performance.
“While we’re confident CSX will get to where it needs to be... if activists light a fire under management that causes them to work harder and get there faster – we’ll take it,” Mr. Paterson said in a note to clients, adding that it is hard to see a downside for investors.
He thinks CSX’s premium valuation is more than justified given its superior pricing growth versus the group, its ability to leverage earnings per share growth higher as operations improve, the potential for upside to his new estimates, and the stock’s defensive attributes.
CSX 1-yr chart: