Railroad stocks jumped to new all-time highs Monday, after a Stifel Nicolaus analyst upgraded Union Pacific Corp. to "Buy" from "Hold," suggesting a new management plan should boost shares over the next several years.
Analyst John G. Larkin said Union Pacific management's aggressive growth plan, combined with a defensive strategy against a weak economy and soaring fuel costs, could drive shares more than 20 percent in the next three to three and a half years. Union Pacific is North America's largest railroad by revenue.
"(Chief Executive) Jim Young's comprehensive 'blocking and tackling' approach seems to be gaining steady traction across the entire company and across all the functional railroad disciplines," Larkin said in a note to clients.
Larkin said the Omaha, Neb.-based company has a significant opportunity to grow earnings through productivity improvement. He also noted the company will likely aim to spend its money wisely in its strongest franchise markets.
He issued a 12-month price target of $182, and raised his estimates for 2008, 2009 and 2010.
Longbow Research analyst Lee Klaskow also raised his 2008 and 2009 estimates for Union Pacific, citing "the continued strong pricing environment and management's renewed focus on its bottom line."
In afternoon trading, Union Pacific jumped $5.28, or 3.5 percent, to $158.28. The stock hit an all-time high of $159.65 earlier.
Burlington Northern Santa Fe Corp. added $2.87, or 2.6 percent, to $111.43. Shares reached an all-time high of $112.40 earlier.
CSX Corp. gained $2.78, or 4.2 percent, to $68.32. The stock reached an all-time high of $68.87 earlier.
Norfolk Southern Railway Co. rose $2.07, or 3.2 percent, to $66.38, after hitting a new all-time high of $66.74 earlier.
Kansas City Southern lifted $1.99, or 4.2 percent, to $48.99, after reaching a new all-time high of $49.13 earlier.
Canadian National Railway Co. gained $1.29, or 2.3 percent, to $58.16, after hitting an all-time high of $58.50.
Canadian Pacific Railway Ltd. rose $2.75, or 3.8 percent, to $76. Its all-time high is $90.15.
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