This rail stock could benefit from port strike, analysts say

By James Rogers

The U.S. port strike that began Tuesday is affecting ports from Maine to Texas

The port strike that began Tuesday is expected to boost Union Pacific Corp. shares thanks to the railroad's extensive operations in the Western U.S., analysts say.

The strike at East Coast and Gulf ports is placing greater demand on West Coast ports and their transportation networks.

"[Union Pacific] stands to benefit in the near-term from an elongated East/Gulf Coast port strike that has driven intermodal volumes West," T.D. Cowen analyst Jason Seidl said in a note released Monday. However, T.D. Cowen lowered its third-quarter rail estimates for Union Pacific (UNP), and also lowered its stock-price target for the company to $252 from $255.

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Last week Susquehanna Financial Group said that both Union Pacific and rival BNSF have benefited from a West Coast container surge as shippers got ahead of the East Coast port strike. Both Union Pacific and BNSF have major operations in the Western U.S.

However, T.D. Cowen warned that Hurricane Helene could have a "notable impact" in the fourth quarter for Eastern carriers, but that it is "too soon to know just how much."

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In a note released Wednesday, Evercore ISI said that Total Class I rail volumes increased 0.8% year over year last week. The week's volumes were "meaningfully" impacted by Hurricane Helene and fell from a recent trend of about 4% year-over-year growth, according to Evercore ISI. Set against this backdrop, Union Pacific was the only railroad to post a year-over-year increase, with volumes up 5%.

Norfolk Southern Corp.'s (NSC) rail volumes were down 1.8% year over year last week, Canadian National Railway Co.'s (CNI) (CA:CNR) were down 2.2% and CSX Corp.'s (CSX) were down 4%, as were Canadian Pacific Kansas City Ltd.'s (CA:CP), according to Evercore ISI.

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Evercore ISI analyst Jonathan Chappell pointed to "the anomalous impact" from Hurricane Helene and the "disruptive" International Longshoremen's Association strike that resulted in "less meaningful" performance of freight categories last week.

-James Rogers

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10-02-24 1617ET

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