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Bernstein is no longer bullish on Union Pacific (NYSE:UNP) and CSX Corp. (NASDAQ:CSX) according to a downgrade note released on Wednesday.
The analysis indicated that while third quarter figures should remain strong, the “reality of weaker volumes, moderation in pricing tailwinds, and elevated inflation” are factors that the market must adjust to.
“Bulls are not wrong that railroads can price through added costs over time, and that longer term the growth narrative is real, but the next shift in sentiment regarding fundamentals is likely to be negative given the challenging macro and elevated inflationary pressures,” the note explained. “We would be trimming on strength as opposed to adding on weakness, and at current levels believe it will be difficult for these stocks to outperform benchmarks over the next 12 months.”
The firm’s analysts added that cost pressures “go beyond” the wage implications stemming from the ongoing labor dispute and PEB recommendations.
As such, both stocks were downgraded to a Hold-equivalent rating from a prior Buy rating. Union Pacific (UNP) -1.63% and CSX Corp. (CSX) -1.05% declined modestly in pre-market trading.
Read more on the White House’s potential intervention in railroad union disputes.
Image and article originally from seekingalpha.com. Read the original article here.