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Morgan Stanley upgraded CSX Corp. (CSX
) to overweight from equal-weight.
Analyst James Valentine says a recent meeting with senior management confirms his belief that steps have been taken to avoid another shortfall such as in the third quarter. He also thinks CSX's longstanding cost-cutting efforts again are gaining momentum and are likely to produce meaningful margin improvement over the next few quarters.
Valentine says this better visibility gives him confidence in his $3.10 2004 earnings per share estimate. He has a $34 one-year target, which is arguably conservative as he assumes slow revenue growth, moderate cost cutting, a 7% drop in 2003 auto volumes, and $27.50 per barrel of oil.