A Hold recommendation has recently been issued to rail transport company Burlington Northern Santa Fe Corporation (BNI) by Zacks senior infrastructure analyst Ann H. Heffron, CFA. Here's what her latest update had to say:
'We are continuing our Hold on Burlington Northern Santa Fe Corporation, but raising our target price to $88. BNI reported 2007 third quarter diluted EPS of $1.48, up 12% year over year and $0.12 greater consensus and $0.06 above our $1.42 estimate, as revenues came in higher and compensation expense came in lower than we had estimated.
'Despite this, we are reducing our diluted EPS estimates to $5.20 from $5.25 for 2007 and to $5.90 from $6.15 for 2008, largely due to significantly higher unhedged fuel costs. Positively, revenues should benefit from fuel surcharges and rate increases, partially offset by lower volumes. BNI recently increased its dividend 28% to a $1.28 annual rate, providing a 1.5% yield.
'The stock is trading below the industry median P/Es for 2007 and 2008, but trading above the industry median on price/book. Moreover, BNI's PEG ratio (P/E divided by the expected earnings growth rate) now matches the industry median. Accordingly, we believe the stock is fully valued. Our Hold recommendation is based upon a six-month target price of $88 or 15X our 2007 EPS estimate of $5.90, roughly in line with the industry median PEG ratio.'
Read the full analyst report on BNI
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