(The Associated Press circulated the following on September 15, 2009.)
NEW YORK Stifel Nicolaus downgraded CSX Corp. on Tuesday, saying the railroad's volume recovery will be slow amid an environment of lower consumer spending.
Moreover, quarter-over-quarter volume gains may not continue, wrote analyst John Larkin in a research note as he downgraded CSX to "Hold" from "Buy."
"Recent sequential volume improvements may not be sustainable as short-term drivers such as 'cash for clunkers,' general inventory replenishment, and freight related to fiscal policy stimuli are likely not sustainable," Larkin said.
He is also cautious on coal volumes since utilities have high stockpiles and a weak economy is cutting into demand for energy.
Larkin sees CSX's total unit volumes dropping 16.1 percent in the third quarter year-over year, falling 8.7 percent in the fourth quarter, then rising 4.1 percent for 2010.
Jacksonville, Fla.-based CSX said in mid-July that demand might have reached its worst point. The railroad said then it expected double-digit declines in shipping demand in the third quarter that were not as bad as the second quarter's 21 percent drop.
CSX shares have more than doubled off a 12-month low in mid-March. That leaves the stock, which closed at $47.08 Monday, too close to Larkin's "fair value" estimate of $49, he said.
CSX shares fell 58 cents to $46.50 in premarket trading.
