Analyst Picks and Pans: BNI, CSX, NSC, UNP, DWA, GPS, BBT

What Wall Street analysts are saying about selected stocks in the news Monday

Burlington Northern Santa Fe (BNI)

CSX Corp. (CSX)

Norfolk Southern (NSC)

Union Pacific (UNP)

Morgan Keegan cuts estimates on four U.S. railroads

Morgan Keegan analyst Art Hatfield wrote in a Mar. 30 note that he's adjusting first-quarter volume and other estimates for the four big U.S. railroad operators based on traffic trends posted by the Association of American Railroads. He increased his forecast for volume declines in the first quarter at these four Class 1 railroads to an average of 16.7% from an average of 11.0%.

Also for the four companies, the analyst cut his yield growth assumptions by 60 basis points on average, and lowered his first-quarter (and in turn, full-year 2009) EPS estimates by an average of $0.09. For 2010 and 2011, Hatfield cut his EPS estimates by an average of $0.06 and $0.07, respectively. He kept his market perform ratings on all four stocks.

DreamWorks Animation SKG (DWA)

Goldman Sachs maintains neutral

Goldman analyst Ingrid Chung said in a Mar. 30 note that the studio's Monsters vs. Aliens opened to an estimated $58.2 million in domestic box office, slightly above her expectation, and the Wall Street consensus forecast, of $55 million. Chung said the outperformance was not large enough for her to increase her estimates; her domestic box office estimate remains $160 million, well below the $190 million consensus.

The analyst believes the "tail" for the movie will be shorter than expectations due to 1) tough economic conditions pressuring repeat viewership as families will find it difficult to pay for the 3D premium more than one time; and 2) some moderate competition from Fast and Furious.

Gap Inc. (GPS)

Goldman Sachs adds to Conviction Buy list

Improvement in spring merchandise at Gap Inc.'s Old Navy segment caused a Goldman Sachs analyst to add the apparel retailer to her list of preferred stocks on Monday.

Goldman analyst Michelle Tan said improving sales in coming months at Gap's Old Navy unit may lift the stock higher, as shares have declined 2% so far this year. Old Navy represents 36 percent of the company's total sales.

Tan said Gap has been trying to position Old Navy as a place where consumers can buy family apparel at value prices, after trying to position the company as a fashionable retailer targeted toward younger customers in their 20s. Tan said merchandise had been more trendy than what shoppers were used to at Old Navy, with last year's colored jeans and silk print dresses.

Tan also said Old Navy's new marketing campaign, launched in February, is getting attention by highlighting value.

BB&T Corp. (BBT)

Stifel Nicolaus & Co. downgrades to sell from hold

Stifel analyst Christopher Mutascio also lowered his 2009 and 2010 earnings estimates for the bank hoilding company on Mar. 30. In a research note, Mutascio said he cut his earnings estimates because of a revised expectation for rising loan losses. BB&T's loan-loss reserves have not kept pace with an increasing quantity of problem loans, Mutascio said.

"Over the past several quarters, total nonperforming assets have increased $1.54 billion," Mutascio said. "However, the company's loan loss reserves have increased just $570 million."

Mutascio said the bank will need to catch up on reserves throughout 2009, and thus cut his estimates. He cut his 2009 earnings estimate to $1.25 per share from $1.70 per share. He lowered his 2010 estimate to $2.05 per share from $2.20 per share.

Because of lower projected earnings, BB&T might be forced to cut its dividend, Mutascio said.