A Thaw For Freight, Transport Stocks Continues On The Street
September 14 2009 - 2:35PM
Dow Jones News
Wall Street's favor for freight and transport stocks continues,
with the second upgrade of a major package handler in as many days
on hopes of a recovery.
But the analysts making favorable freight, rail and shipping
calls seem to have much more faith in manufacturing growth and
rising commodity shipments than they do in the U.S. consumer.
Credit Suisse analysts threw out a negative rating on United
Parcel Service (UPS) shares Monday, pointing to improving domestic
and international shipping as they raised the stock to neutral from
underperform.
"The contraction in freight has ended," analysts Christopher
Ceraso, Allison Landry and Liam O'Donovan wrote, saying their own
freight forecasts, FedEx Corp.'s (FDX) better-than-expected
earnings preannouncement last week and a stock that has lagged its
peers each augur better news, though not a buy rating, for UPS
shares.
They don't expect a sudden surge. Rather, Credit Suisse
forecasts another six quarters of shrinking declines in freight
tonnage before any year-over-year increases.
The upgrade follows a positive report on competitor FedEx from
Bank of America/Merrill Lynch, where analyst Ken Hoexter urged
clients to buy the stock, even though consumer sentiment may remain
weak.
"We expect the airfreight and railroads to continue to post
strength in the near term," Hoexter wrote, raising the shares to a
buy rating from neutral.
Those moves follow BMO Capital Markets' Sept. 3 upgrade of rail
carriers Norfolk Southern Corp. (NSC) and CSX Corp. (CSX) to
outperform from market perform, premised in part on coal shipments
and a turn in manufacturing and chemicals.
But BMO also cut its view of rail carrier Burlington Northern
(BNI) to market perform.
"The U.S. consumer will be in financial rehab for a couple of
years," analyst Randy Cousins said as he urged clients to avoid
rails with greater consumer exposure.
UPS shares did not move much following Credit Suisse's upgrade,
rising a fraction of a percent to $58.87 in recent trading.
FedEx shares bounced last week following the company's earnings
preannouncement, however, with shares rising 6.4% Friday to $77.32.
Shares rose half a percent in recent trading to $77.72.
-By Brendan Conway, Dow Jones Newswires; (212) 416-2670;
brendan.conway@dowjones.com