Citi sees ‘relief rally’ for Norfolk, opens ‘positive catalyst watch’

Citi analyst Christian Wetherbee opened a "30 day positive catalyst watch" on shares of Norfolk Southern (NSC) but keeps a Neutral rating on the name. Investors appear to be pricing in $400M of additional ongoing costs related to the Palestine accident, which feels high, the analyst tells investors in a research note. Accordingly, the firm sees the potential for a "relief rally" as investors get a better sense of Norfolk’s liabilities. While the company’s results will be "very noisy" and it could incur up to $150M of insurance-related costs, the stock’s multiple gap should narrow versus CSX (CSX) as Norfolk’s network fluidity and volumes relatively improve from current depressed levels, says Citi.