CSX sees ratings cut at BMO Capital with M&A premium seen as priced in

[CSX Locomotive in Philadelphia]
Kyle Ortiz/iStock Editorial via Getty Images

CSX Corporation (NASDAQ:CSX [https://seekingalpha.com/symbol/CSX]) traded lower on Monday after BMO Capital Markets downgraded the rails stock to a Market Perform rating after having it slotted at Outperform.

Analyst Faadi Chamoun advised investors that the M&A upside for CSX (CSC) is already likely priced into the current trading level.

Chamoun said that since rail mergers are becoming a major factor influencing short- to medium-term implications for stocks in the sector, the firm has considered a wide range of potential consolidation scenarios and their implications for investment cases.

"While the instinct might be to favor the target in an M&A deal, we believe there is significant uncertainty surrounding key details of any potential deal involving CSX," warned Chamoun. "After a 20% appreciation in the stock since speculation about potential deals started, we now view the risk/reward profile as more balanced," he added.

CSX (NASDAQ:CSX [https://seekingalpha.com/symbol/CSX]) was down 1.0% in Monday afternoon trading. The rails stock is up 2.8% over the last six weeks and trades near the top end of the 52-week range. Wall Street analysts and Seeking Alpha analysts both have a Buy rating on CSX (CSX [https://seekingalpha.com/symbol/CSX]), while the Seeking Alpha Quant Rating is flashing Hold.

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