CSX shares downgraded following CEO’s death

CSX CEO death raises questions about strategy, M&A potential

CSX CEO passes away
Shares of CSX (CSX) are off their worst levels of the session and trading fractionally higher following the death of the company’s CEO over the weekend.

 

While the news prompted a stock downgrade to Hold at TD Securities, JPMorgan analyst Brian Ossenbeck argued that Hunter #Harrison’s legacy will continue at CSX and that he sees downside in the stock being limited.
Meanwhile, Cti analyst Christian #Wetherbee pointed out that the death of the company CEO may increase the likelihood of a merger with Canadian Pacific (CP).

 

MOVING TO THE SIDELINES:

Following the unexpected medical leave of absence and subsequent death of CEO Hunter Harrison, TD Securities downgraded CSX to Hold from Buy and lowered its price target on the shares to $54 from $63. The firm argued that senior management now lacks a member with an operating background.

 

LIMITED DOWNSIDE:

Meanwhile, JPMorgan’s #Ossenbeck told investors that he believes Hunter Harrison’s legacy will continue at CSX, reiterating an Overweight rating and $63 price target on the shares. The analyst said he estimates downside in the stock to be limited to $45-$48 based on his below consensus forecasts, with U.S. tax reform and a “tighter truck market” providing positive near-term catalysts.

 

Nonetheless, Ossenbeck acknowledged that the lack of a defined management succession plan remains a near-term hurdle for CSX, and will not likely be addressed until the investor day in first quarter of 2018.

 

Voicing a similar opinion, Baird analyst Benjamin #Hartford said he believes the shares should find support in the $48-$50 level, which is where shares traded during previous periods of transition for the company.

 

While Hunter Harrison’s passing “undoubtedly” introduces incremental risk and uncertainty to the trajectory of CSX’s operating ratio improvement, and it is even more so a “show-me” story given the absence of his leadership, Hartford noted that the PSR model has been put into place, the company employs the talent needed to execute the plan, and there is no reason to diminish CSX’s expectations regarding the pace and magnitude of future progress. He reiterated an Outperform rating and $58 price target on the shares.

 

MERGER WITH CANADIAN PACIFIC

In a research note of his own, Citi’s Wetherbee told investors that he believes the death of Harrison may increase the likelihood of CSX attempting to merge with Canadian Pacific. However, the analyst noted that he is not sure a deal could be accomplished due to elevated regulatory risk.

 

Canadian Pacific and CSX may merge. Stockwinners.com
Canadian Pacific and CSX may merge.
A “large portion of the heavy lifting” related to the start of CSX’s turnaround occurred in 2017, allowing 2018 to be a year focused on executing, he contended, adding that he still believes in the company’s long-term potential. Wetherbee also pointed out that he sees Jim Foote as capable of executing Hunter’s vision, while noting that CSX’s board could move to add seasoned executives in the coming months. The analyst reiterated a Buy rating and $58 price target on the shares.

 

PRICE ACTION

In Monday afternoon trading, shares of CSX are fractionally lower to about $53 per share.


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Barron’s is bullish on Verizon

Barron’s, the weekly publication owned by the Wall Street Journal, in its latest issue mentions several names: 

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BULLISH  MENTIONS

 

Rising sales may lift Mondelez (MDLZ)- There is reason to hope that growth is returning to Mondelez, with sales perking up in its latest quarter, especially in the developing markets, Bill Alpert writes in this week’s edition of Barron’s. If the company and its new CEO can deliver sales growth, many analysts think Mondelez’s stock could rise to $50 or more, the report notes.

Wheat prices may rise amid cold December – A “brutal cold snap” in December is likely and could lift winter wheat prices higher than $5 a bushel, a rally that would aid the farm economy that has been hurt by steadily falling wheat prices since mid-2012, Simon Constable writes in this week’s edition of Barron’s. Among companies that benefit from higher crop prices are fertilizer makers Mosaic (MOS) and Agrium (AGU), the report notes.

Infrastructure stocks should rise if Congress passes legislation – It may be easy to be skeptical about President Donald Trump’s ambitious effort to rebuild aging bridges, roads and other elements of the country’s infrastructures, but there is reason for hope, John Kimelman writes in this week’s edition of Barron’s. For investors in a group of about a dozen infrastructure companies such as Vulcan Materials (VMC) and Fluor (FLR), legislation cannot be considered soon enough, he contends. Other companies that may get meaningful boosts include Martin Marietta Materials (MLM), Aecom (ACM), Jacobs Engineering Group (JEC), Granite Construction (GVA), Eagle Materials (EXP), and U.S. Concrete (USCR), Barron’s notes, adding that even equipment companies like Caterpillar (CAT) could benefit.

Tencent still has upside – While Tencent (TCEHY) is up 125% this year, the stock still has lots of upside, Assif Shameen writes in this week’s edition of Barron’s.

Verizon could return 20% over the next year – A long price war in wireless is easing, which has left Verizon’s (VZ) shares looking cheap, Jack Hough writes in this week’s edition of Barron’s. They could return 20%, including a dividend yield of 5%, over the next year, he adds.

BEARISH  MENTIONS

Challenges at HP Enterprise loom large– In a follow-up story, Barron’s says that as HP Enterprise (HPE) CEO Meg Whitman prepares to retire in February, the company no longer “has to shut the lights at night to save money.” However, plenty of challenges remain, notwithstanding Whitman’s moves to reconfigure the business, the report notes. The challenges at HP Enterprise loom large, as cloud-computing leaders Amazon (AMZN), Microsoft (MSFT) and Alphabet’s (GOOGL; GOOG) increasingly buy less HPE gear because they are building their own, the report notes.


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JB Hunt and Wal-Mart to use Tesla’s trucks

J.B. Hunt reports reservation to purchase multiple Tesla Semi tractors

Wal-Mart says has pre-ordered 10 units of Tesla’s new heavy-duty electric vehicle for Wal-Mart Canada

[youtube https://www.youtube.com/watch?v=5n9xafjynJA&w=640&h=360]

J.B. Hunt Transport Services (JBHT) announced that it placed a reservation to purchase multiple Tesla (TSLA) Semi tractors to be manufactured by Tesla.

The electric tractor was unveiled by Tesla at an event on November 16.

J.B. Hunt plans to deploy electric tractors to its Intermodal and Dedicated Contract Services divisions to support operations on the West Coast.

In addition to the electric truck investment, J.B. Hunt is also supporting sustainable initiatives such as reducing engine idle time, governing top speed limits, converting over-the-road shipments to intermodal, engineering fleet routes that maximize efficiency, and using biodiesel fuels when possible.

In April, J.B. Hunt announced a five-year, $500M commitment to enhancing operating systems, developing cloud infrastructure, and creating innovative and disruptive technologies.

The additional investment in Tesla trucks further demonstrates J.B. Hunt’s commitment to meeting the needs of an evolving supply chain and introducing new technology for its customers and employees.

TESLA  TRUCKS

Tesla unveiled a sleek electric semi truck with semi-autonomous capabilities and a new roadster.

Emphasizing the truck’s “badass” performance, Tesla CEO Elon Musk pitched the new Tesla Semi as the safest, most comfortable truck ever.

The semi is a fully electric Class 8 truck, a category of freight vehicles that weigh more than 33,000 pounds, including tractor-trailer rigs that form the backbone of commercial road freight. This one, Musk said, can haul 80,000 pounds.

The truck can gain 400 miles of range with just a 30-minute charge from a “megacharger” and its operating cost per mile is 20 percent below that of conventional diesel semi trucks.

Tesla’s offering has a range of 500 miles at maximum weight at highways speeds, much higher than early spec reports of a range of 300 miles. Musk said the truck has a coefficient of drag of just 0.36, making it more aerodynamic than the Bugatti Chiron, a $2.7 million supercar with a drag coefficient of 0.38.

At the end of the event, Musk also presented the company’s new four-seat roadster, a car with 620 miles of range that can go from zero to 60 mph in 1.8 seconds. “The point of doing this is to give a hardcore smackdown to gasoline cars,” Musk said. It’s also claimed to be the fastest production car ever made.

ANALYST COMMENTS

Morgan Stanley analyst Ravi Shanker said Tesla “unveiled the future of trucking” with its Class 8 semi truck, which he contends appears to best current diesel truck performance in “almost every measurable way.” While what he heard was very impressive, questions remain about battery size, launch partners and third-party logistics services, said Shanker, who adds that “its now time to deliver.” The firm has an Equal Weight rating and $379 price target on Tesla shares.

Wal-Mart Gets Onboard

Following Tesla’s (TSLA) unveiling of a new electric semi-tractor-trailer last night, Wal-Mart issued the following statement to CNBC: “We have a long history of testing new technology – including alternative-fuel trucks – and we are excited to be among the first to pilot this new heavy-duty electric vehicle. We believe we can learn how this technology performs within our supply chain, as well as how it could help us meet some of our long-term sustainability goals, such as lowering emissions.”

Wal-Mart says has pre-ordered 10 units of Tesla’s new heavy-duty electric vehicle for Wal-Mart Canada.

TSLA closed at $313.00   JBHT closed at $102.98


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CSX postpones investors conference

CSX postpones investor conference, announces share buyback

CSX postpones investor conference, announces share buyback. See Stockwinners.com

Following yesterday’s announcement of executive changes including naming Jim Foote as COO, CSX Corporation (CSX) is postponing its scheduled October 30th Investor Conference to a later date.

“Our team continues to build momentum and the addition of Jim increases my confidence in our ability to serve customers and deliver shareholder value,” said Hunter Harrison, president and CEO.

“I am more confident than ever in CSX’s ability to achieve industry leading operating and financial performance and look forward to showcasing our leadership team at a future date.”

CSX also announced the Board has authorized $1.5B in share repurchases, which builds on the $1.5B program recently completed.

“The Board’s action to expand the repurchase program demonstrates our confidence in CSX’s long term future and ability to generate substantial free cash flow,” said Harrison.

Citi Comments

Citi analyst Christian #Wetherbee believes the “surprising” postponement of CSX’s investor day will likely prompt concerns about CEO Hunter Harrison’s health and “potential disarray in the management ranks” following the replacement of two C-level executives Wednesday.

The analyst, however, believes the company needs more time for new COO Jim Foote to get familiar with operations in order to participate in the presentation.

Wetherbee expects the shares to face downward pressure in the short term, but thinks little incremental has changed at the company. He keeps a Buy rating on CSX with a $58 price target.

CSX closed at $52.92.


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