CSX Stock Has Had a Bumpy Ride. It’s Time to Buy, Says Wells Fargo.

Coming into Thursday trading, CSX stock was up about 5% this year, but down about 5% since Union Pacific and Norfolk Southern announced plans to merge in late July. (Spencer Platt/Getty Images)

Key Points

About This Summary

• Wells Fargo upgraded CSX shares to Buy from Hold, increasing the price target to $40 from $37.
• A collaboration between BNSF and CSX for intermodal shipping could generate up to $375 million in additional annual revenue for CSX.
• Wells Fargo raised CSX’s 2026 earnings per share estimates to $1.90 from $1.80, valuing shares at 21 times the estimate.

After a rocky few weeks, shares of CSX look like a buy to Wells Fargo, with several catalysts on the horizon that could lead to faster earnings growth.

Thursday, Wells Fargo analyst Christian Wetherbee upgraded shares of CSX to Buy from Hold. His price target went to $40 from $37.

“Recent operational headwinds are clearing, and new commercial agreements (and customer diversification efforts) will likely drive volume outperformance,” wrote Wetherbee.

In August, Berkshire Hathaway’s railroad BNSF and CSX announced a collaboration for intermodal shipping. Intermodal refers to freight that travels by both railroad and truck for portions of the shipping journey. That could mean up to $375 million more annual revenue for CSX, Wetherbee wrote. Another catalyst cited was the end of two construction projects, which will reduce operating spending.

CSX traded as high as $34.22, but closed down 0.1% at $33.78. The S&P 500 and Dow Jones Industrial Average dropped 0.5% and 0.4%, respectively.

Coming into Thursday trading, CSX stock was up about 5% this year, but down about 5% since Union Pacific and Norfolk Southern announced merger plans in July. The combination could mean stiffer competition for CSX if it passes regulatory muster.

BNSF and CSX, for their parts, don’t seem too interested in trying to combine, creating another transcontinental railroad to oppose Union Pacific and Norfolk. “While BNSF owners have not expressed interest in a merger with CSX, we continue to believe the competitive environment may necessitate further consolidation if the Union Pacific/Norfolk Southern merger is approved,” added Wetherbee. The potential for a merger “likely leads to a sustained elevated multiple for CSX.”

He raised his 2026 earnings per share estimates to $1.90 from $1.80, valuing shares at 21 times his estimate. CSX stock has traded for closer to 16 times estimated next year’s earnings over the past few years.

Overall, 69% of analysts covering CSX stock rate shares Buy, according to FactSet. The average Buy-rating ratio for stocks in the S&P 500 is about 55%. The average analyst price target for CSX stock is about $38.

Write to Al Root at allen.root@dowjones.com