Stifel, Nicolaus & Co. Analyst John Larkin says investors have been negative about railroads lately because of decreased grain and coal volumes. But, he sees opportunity in stocks like Union Pacific Corporation (UNP).
“That negative year-over-year volume comparison has really placed a black cloud over the group,” Larkin says. “However, the ugly volumes create some buying opportunities across the rail group, in our view.”
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Larkin says Union Pacific was having a very challenging second quarter. But, he believes it represents the company’s low point of the cyclical downturn.
“The company has shed a lot of cost here in the first half to rightsize its asset deployment, and I think the year-over-year comps will look much easier as we move toward the end of the year and into 2016,” he says. “At that time, we think the stock will regain some of its lost momentum.”
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