CSX Corp. Scores on CDP Index

On of the leading North American railroads CSX Corporation ( CSX - Analyst Report ) has been recognized for its carbon disclosure commitment for the third consecutive year. CSX with a score of 95, occupies the fourth-highest position on Carbon Disclosure Project (CDP) S&P 500 Carbon Disclosure Leadership Index (CDLI) and was second-highest among the S&P industrial companies.

CDP is an international, not-for-profit organization that offers environmental management system to companies across the globe. CDP currently has a strength of 655 institutional investors with assets worth of $78 trillion. The organization collects information on greenhouse gas emissions through businesses and assesses weather and water related risks and opportunities.

CSX Corporation’s presence in the CDP index represents its awareness toward conducting an environment friendly business operation that remains accretive to the economy as well as ecology.

Apart from environmental protection, CSX Corp. continues to invest in expanding network and terminal capacity to ensure safety and service reliability for its customers. The company expects to make an investment of $2.25 billion for 2012 and its estimated capital investment for over 5 years represent 18% of revenue. The company has launched the National Gateway, a multi-year public-private infrastructure initiative, which will significantly improve the efficiency of the freight network between the Mid-Atlantic ports and the Midwest.

Total project costs are approximately $850 million, of which CSX Corp. expects to contribute approximately over $550 million. Additionally, CSX Corp. entered into a deal with Florida state regulators to deploy computerized rail operation called SunRail. As per the contract, CSX will sell a 61-mile rail corridor to the State of Florida and in exchange receive exclusive rights to operate on the SunRail track. The new system is expected to start operating in 2014. Going forward, CSX plans to invest $500 million received from sale proceeds of the deal for the development of Florida rail infrastructure.

However, we remain cautious on CSX Corp. given the declines in coal volumes, which constitute a significant part of its business. Further, the company’s capital intensive nature, unionized workforce, increased competition from major railroads like Norfolk Southern Corp. ( NSC - Analyst Report ) as well as strict railroad regulations keep us on the sidelines.

We maintain our long-term Neutral rating on CSX Corporation. For the short-term (1-3 months) the stock holds a Zacks #3 Rank (Hold).