Zacks Analyst Blog Highlights: Union Pacific, CSX, Norfolk Southern, Kansas City Southern and Covidien - Press Releases

For Immediate Release

Chicago, IL – September 17, 2010 – Zacks.com Analyst Blog features: Union Pacific Corp. (UNP), CSX Corp. (CSX), Norfolk Southern Corp. (NSC), Kansas City Southern (KSU), and Covidien plc (COV).

Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: http://at.zacks.com/?id=5513

Here are highlights from Thursday's Analyst Blog:

Railroads Under Congressional Review

In a recent report presented by the U.S. Senate Commerce Committee it is stated that the discretionary pricing power enjoyed by the Class I freight rail transport companies are putting excessive pressure on freight customers. The freight railroad operators are enjoying this pricing power since 1980 when the U.S. government adopted the Staggers Rail Act. The idea was to allow rail transporters to hike price on captive shippers like electric utilities, chemical and agricultural companies in order to improve profitability of the struggling railroad industry.

The Senate Commerce Committee headed Sen. John D. Rockefeller has expressed his opinion that the railroads have become financially stable. An improving U.S. economy, massive surge in automotive shipments, and a sharp rebound in many end markets are expected to fuel the future growth of this industry. However, because of the Staggers Rail Act, the railroads are hiking their freight rates nearly 5% per annum and maintaining a double digit profit margin. On the other hand, a higher transportation rate is actually trickling down to the end users resulting in higher household expenditures.

If the U.S. Surface Transportation Board, the federal agency that regulates railroads, decides to scrap this act, the major freight rail carriers that may be affected are Union Pacific Corp. (UNP), CSX Corp. (CSX), Norfolk Southern Corp. (NSC), Kansas City Southern (KSU), and Burlington Northern Santa Fe Corp.

Meanwhile, the Association of American Railroads, the main industry trade group, has argued that the allegation of exorbitant price charge is uncalled for in view of massive capital expenditure that these companies need to undertake for building and upgrading railroad tracks. The industry body alleged that freight rail transporters together invested a significant amount of $42 billion in the previous two years for railroad track expansion and maintenance.

The U.S. freight railroad industry is witnessing gradual improvement since early 2010. As the U.S. economy continues to grow, demand for carriage also becomes robust and the momentum is expected to sustain in the long run. However, it remains to be seen how the industry maintains its steady-state growth if any adverse change occurs related to its discretionary pricing policy, which had helped the industry.

Covidien Unfolds FY2011 Guidance Leading healthcare product maker Covidien plc (COV) has divulged its financial forecast for fiscal 2011. In a recent investor meeting, the Ireland-based company stated that it envisions net sales for the year to budge up 6%–9% year-over-year (assuming current foreign exchange rates). Covidien currently expects sales to grow 5%–8% in fiscal 2010. The current Zacks Consensus Estimate for revenues is $10.46 billion and $11.21 billion for fiscal 2010 and fiscal 2011, respectively, representing an estimated annualized growth of roughly 7%.

The company anticipates revenues from Medical Devices, its principal growth engine, to leap 10%–13% year-over-year in fiscal 2011. The acquisition of brain monitoring equipment manufacturer Aspect Medical is driving growth in this division. Revenues from the Medical Supplies unit are expected to be stable to up 3%.

However, Covidien expects weakness in its Pharmaceuticals segment to sustain in fiscal 2011 as it foresees sales from this division to clip 5% year-over-year. The division remains challenged by aggressive competition and pricing pressure which has contributed to erosion in Generic products sales.

Adjusted (excluding one-time items) operating margin for fiscal 2011 has been projected in the range of 21%–22%, in line with the company's expectation for the current fiscal year. The effective tax rate is expected between 20% and 21% while free cash flow is forecasted to exceed $1.6 billion.

Want more from Zacks Equity Research? Subscribe to the free Profit from the Pros newsletter: http://at.zacks.com/?id=5515.

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today: http://at.zacks.com/?id=5517.

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=5518.

Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Follow us on Twitter: http://twitter.com/zacksresearch

Join us on Facebook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts.

Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.

Contact:
Mark Vickery
Web Content Editor
312-265-9380
Visit: www.zacks.com

 

 

 
COVIDIEN PLC (COV): Free Stock Analysis Report
 
CSX CORP (CSX): Free Stock Analysis Report
 
KANSAS CITY SOU (KSU): Free Stock Analysis Report
 
NORFOLK SOUTHRN (NSC): Free Stock Analysis Report
 
UNION PAC CORP (UNP): Free Stock Analysis Report
 
Zacks Investment Research