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Ahead of the Bell: Norfolk Southern upgraded

NEW YORK (AP) -- While Norfolk Southern has underperformed of late, 2013 should be a turning point, an analyst said Monday as he raised his rating and price target for the railroad company.

Norfolk Southern Corp. reported last Tuesday that its fourth-quarter net income fell on weak coal demand, but its results still beat Wall Street's expectations.

Jefferies' Peter Nesvold said in a client note that the company's underperformance over the past 12 to 18 months is mostly due to a sharp decline in total coal volumes and operational disruptions that led to third-quarter earnings that missed analysts' estimates.

Nesvold believes market fears over softening export coal volumes will ease by year's end, which will help Norfolk Southern. A return to more normalized gas prices, industrial production and weather patterns could also benefit the company, he added.

Nesvold boosted Norfolk Southern to "Buy" from "Hold" and increased the Norfolk, Va., company's price target to $86 from $74.

Shares rose 11 cents to $69.80 in premarket trading. The stock has traded between $56.05 and $75.56 over the past year.