BNSF Railway has been one of the best-performing railroads on Wall Street since the market bottomed in March, with its shares up around one-third in price by last week. Nonetheless, Citi Investment analyst Mathew Troy issued a sell rating on BNSF on Monday, as well as on CP Rail.
Troy believes the railroad industry’s ability to perform well under difficult conditions may not survive an extended recession or the more stringent government regulation that now appears to be a possibility. While lowering BNSF’s rating, he acknowledged that it is "one of the best run of railroads” but said its growth may be compromised by its remaining fuel contracts plus high exposure to weakening grain and coal markets.
He downgraded CP because of weakening fertilizer and coal markets, and at the same time moved what he called “best-in-class CN” from buy to hold because he believes its stock became overpriced.
At a time in mid-afternoon trading Monday when the Dow average was down 0.60%, BNSF was down 3.86%; CP, down 3.13%; Kansas City Southern, down 9.28%; Norfolk Southern, down 4.97%; CSX, down 5.00%; and Union Pacific, down 4.884%.