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Norfolk Southern track record prompts higher price target

Norfolk's revenue increase was led by coal shipments

STR/AFP/Getty Images

TD Securities analyst Cherilyn Radbourne raised her target on Norfolk Southern Corp. after the U.S. railway reported better-than-expected third-quarter profit.

Norfolk, whose revenue increase was led by coal shipments, reported 3 per cent growth in carload volumes from a year ago, and a 4 per cent increase in revenue ton miles, an important profitability measurement in the freight business. Those numbers are second only to Canadian National Railway Co.

"Norfolk Southern and Canadian National Railway continue to lead the pack to date in the fourth quarter with both reporting 5 per cent carload growth [over the previous year]" she added.

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The U.S. railway also bought back about 3 per cent of its shares outstanding in the third quarter. "These purchases will supplement earnings per share growth going forward, and we believe they are indicative of confidence in the outlook," the analyst said. "Norfolk expects continued growth across most traffic segments going forward."

Upside: She is maintaining her "buy" rating, but increased her one-year target by $8 (U.S.) to $95 a share.

Nabors Industries Ltd.

The oil field services company reported stronger-than-expected third-quarter results, helped by increased activity in Canada, said Canaccord Genuity analyst John Tasdemir. The international business, which has been hampered partly by delays in rig start-ups in the Middle East, "continues to be a work in progress," he said.

Downside: He maintains a "buy" rating, but cut his one-year target by $9 (U.S.) to $25 a share.

MeadWestvaco Corp.

MeadWestvaco reported "disconcerting results" in the third quarter with falling profit from consumer packaging due to higher costs for resins, stainless steel, energy and freight, said BMO Capital Markets analyst Stephen Atkinson. Prices are also dropping in the European and Chinese markets because of a slowdown in economic activity, he said.

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Downside: The analyst reduced his rating for the packaging company to "underperform" from "outperform," and cut his one-year target by $2.50 (U.S.) to $25 a share.

5N Plus Inc.

The high-purity materials supplier could face slower growth, given economic uncertainty and recent leadership changes at its customer, First Solar Inc., said M Partners analyst John Safrance. By acquiring specialty metals producer MCP Group SA this year, First Solar is expected only to account for 10 per cent of 2012 sales, against 75 per cent last year, he said.

Downside: He maintains a "buy" rating, but cut his one-year target by $2 to $11.50 a share.

Open Text Corp.

The enterprise software maker reported solid first-quarter results with strong licence-revenue growth fuelled largely by acquisitions, said Versant Partners analyst Tom Liston. "Management indicated that the pipeline remains robust, particularly for productivity-driven solutions.".

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Upside: Mr. Liston maintains his "buy" rating, but raised his one-year target by $2 to $70 a share.

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