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Transportation & Logistics - All Aboard: Jefferies' Second Annual Coal Primer for Transport Analysts
—Peter Nesvold, Senior Equity Research Analyst, Autos & Auto Parts, Airfreight & Surface Transport
Our second annual Coal Primer for Transport Analysts, a 90-page deep-dive report, leverages both our Transportation & Logistics and Metals & Mining research teams to present an investment case on the rails relative to the coal market. As many investors know, coal is the biggest profit-driver of the Class I railroads – representing as much as 25%-35% of earnings. After last year’s Primer accurately predicted the lower-than-expected risk to rails of a rotation into natural gas, this year we are predicting yet another differentiated upbeat view. We see significant upside potential from normalized coal volumes and the risk of weak export coal volume being significantly less impactful than consensus expectations. On the back of this analysis, we have upgraded Norfolk Southern (NSC) to Buy and raised estimates for CSX (CSX) on increased visibility into earnings potential.