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Stifel Nicolaus & Co. Inc. analyst John Larkin recently lowered his ratings to “hold” from “buy” on CN, Canadian Pacific, and four trucking and transportation companies because their respective stock prices have reached or are approaching his 12-month fair value estimates.

In a research note issued March 27, Larkin also cut to “hold” from “buy” his ratings for Landstar System Inc., Old Dominion Freight Line Inc., Saia Inc. and Universal Truckload Services Inc.

Larkin, who has yet to see a “meaningful recovery in freight demand,” said he expects first-quarter earnings to be the weakest “of the freight recession,” although he didn’t change his earnings estimates for the six companies.

Rail volumes for six North American Class Is fell 16.5 percent year-over-year on average for the week ending March 21, on par with the 16.2 percent average decline so far this year, Larkin said. CN’s and CP’s unit volumes were down 15.1 percent and 8.3 percent, respectively, he added. CP’s volumes do not include the Dakota, Minnesota & Eastern Railroad Corp.’s totals, but the Class I’s volumes fell 16 percent when adjusted for the acquisition.

As for the truckload industry, Larkin noted that while supply and demand tightened for a while last year, “volumes have gotten significantly worse and pricing competition has intensified” during the first quarter. There is overcapacity in the less-than-truckload industry, and that won’t change any time soon, he said.

Meanwhile, in a separate report issued March 27, Larkin said that Norfolk Southern Corp. and Kirby Corp. were “attractively valued” at their current stock prices. NS shares are trading below the Class I rail group — 8.2 times 2010 earnings estimates versus 9.9 times for the group — and below its historical price-to-earnings trading range. NS also has several initiatives under way to “further improve already excellent operations, as well as negate CSX’s geographic advantages,” he said. Among the initiatives Larkin listed: the Crescent, Heartland, Patriot and Mid-America corridor endeavors.

Shares of Kirby, the largest provider of liquid barge transportation, are trading below that of the broader transportation industry — 9.4 times 2010 earnings estimates versus 11.6 times, respectively — and at the low end of their historical price-to-earnings trading range, Larkin noted. Kirby is one of the only publicly traded transportation companies to provide earnings guidance for 2009, he added.

— By Desiree J. Hanford. A Chicago-based free-lance writer, Hanford covered the equities market, including transportation, for Dow Jones & Co. for 10 years.