CLSA Initiates Union Pacific At Sell, Cites Lack Of Export Opportunities

CLSA's David Lipschitz Initiated Union Pacific Corporation UNP at Sell with a price objective of $79.00.

"We expect UNP's coal business to remain under pressure on inventory overhang and lack of export opportunities," said the CLSA analyst. Although Lipschitz noted a recent commodity rally driven by improving sentiment in China, he stated, "US coal prices remain under pressure due to weak electricity generation after a relatively mild winter."

Related Link: CLSA Initiates Kansas City Southern At Underperform, Calls Stock "Vulnerable"

Unlike Kansas City Southern KSU, Union Pacific was less vulnerable to trucking competitors due to its long-haul intermodals, but downside from trucking competitors are not completely eliminated and will continue in the future said the CLSA analyst.

Additionally, Lipschitz sees "the structural shift from coal to intermodal shipments to weigh on operation margins."

Due to these concerns, the CLSA analyst's forecast 2016 EPS and revenue decreasing 5.30 percent and 8.80 percent from 2015 levels.

At time of writing, Union Pacific was down 1.44 percent at $81.29, while Kansas City Southern was down 1.55 percent at $90.07.