NEW YORK (TheStreet) -- Shares of freight railroad CSX Corp (CSX) were up 1.77% to $34.48 in Thursday afternoon trading after BMO Capital Markets simultaneously raised its price target on the stock and downgraded it to "market perform" from "outperform" in a research note circulated to investors Thursday morning.
CSX should see its shipping volumes increase despite a moderate headwind from a slowing coal market, BMO analyst Fadi Chamoun argued in the note, believing that intermodal shipping will lead the way. As of Sept. 23 - the end of the third quarter - CSX has shipped roughly 2.05 million intermodal units year-to-date, pulling in roughly $1.25 billion in revenue.
Those numbers are actually slightly down year-over-year, but CSX beat analyst expectations when it reported third quarter earnings on Oct. 12. The railroad reported earnings per share of 48 cents on $2.71 billion in revenue. Analysts had expected to see earnings of 45 cents on $2.69 billion.
CSX's return on invested capital could also improve as the railroad moderates its capital spending due to excess locomotive capacity and spending on the installation of positive train control system declines, Chamoun argued.
Despite all that, why the downgrade?
Chamoun said that the stock's run-up in valuation has given it a more balanced risk/reward proposition for investors.
"Near-term pressures from an oversupplied trucking market remain elevated, economic tailwinds are expected to remain moderate, and the pace of cost savings is likely to decelerate vs. 2016 levels," he added.
As such, the target price hike is minimal, up to $35 from $34.
Separately, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:
We rate CSX CORP as a Buy with a ratings score of B. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its expanding profit margins, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. We feel its strengths outweigh the fact that the company has had sub par growth in net income.
You can view the full analysis from the report here: CSXCSX data by YCharts