Railroad company CSX releases its third-quarter earnings Tuesday, but Donald Broughton, transportation analyst at Avondale Partners, said he wouldn't buy into the company at its current levels because of lower volumes and pricing risks associated with railroads.
"The bottom line is for rails, it's going to be another year or two before they can get back towards peak earnings," Broughton said.
Broughton recommended investors look for transportation companies that have a flexible cost model, such as Landstar . He also said FedEx offers more stability than other companies in the sector because of its strong reliance on freight.
"When you look at international air freight, of all of the modes of freight, that's the one that's rebounding the strongest. And for FedEx, that's the most profitable thing they do," Broughton said.
"For me that makes a lot more sense, with all the uncertainty out there, is to bet on the things you know you can count on."
Morgan Stanley recently upgraded its price target on CSX to $57, but Broughton said he thinks that's too high. Analysts are expecting the copmany to bring in earnings of 71 cents a share, but said he thinks it will be closer to 63 cents.
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Broughton does not own any shares of CSX or FedEx.