2 Analysts Downgrade CSX on Weak Coal Demand

NEW YORK (AP) -

Two stock analysts lowered their investment rating on CSX Corp. Thursday, saying that lower demand for coal could hurt the railroad operator.

RBC Capital Markets analyst Walter Spracklin downgraded CSX’s stock rating to “Sector Perform” from “Outperform.” He also lowered the company’s price target to $28 from $31.

He cut the company’s 2014 earnings estimate to $1.91 per share from $2 per share and its 2015 earnings estimate to $2.17 per share from $2.27 per share.

“While the challenges in coal markets are not new news,” Spracklin said in a note to clients, “this segment did not rebound in 2013 as we had previously anticipated and we have to recognize the risk that these headwinds could persist indefinitely.”

Freight railroads have been struggling with weak coal demand over the past couple of years as cheap natural gas prices prompted many utilities to switch fuels. CSX’s coal revenue fell 9 percent in the third quarter to $720 million.

Fadi Chamoun, an analyst at BMO Capital Markets, downgraded the company to “Market Perform” from “Outperform.” In a note to clients, Chamoun cited “poor visibility around the coal outlook over the next year.”

A CSX representative did not immediately respond to an emailed request for comment.

The company reported stronger third-quarter results earlier this week, despite disappointing coal revenue. The results beat Wall Street expectations, and the railroad company slightly increased its outlook for the year.

Shares of CSX fell 52 cents, or 2 percent, to $ 25.37 Thursday.