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Bull of the Day: CSX Corp. (CSX)

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CSX Corporation (CSX - Free Report) is a big name in railway transportation. Across the energy, industrial, construction, agricultural, and consumer products markets, CSX provides rail, intermodal, and rail-to-truck transload services and solutions.

The company has a network that connects every major metropolitan area in the eastern United States, and links over 240 short-line railroads and more than 70 ocean, river, and lake ports with major population centers and farming towns.

Heading into its second quarter earnings report, many investors were worried about CSX’s growth prospects after the sudden death of its CEO Hunter Harrison late last year. Those concerns, however, were quickly brushed aside as Q2 turned out to be a fantastic quarter for the company.

Both earnings and revenues easily beat the Zacks Consensus Estimate; revenues saw 6% growth year-over-year, while net income jumped 71%. CSX noted 34% and 24% growth in operating income and adjusted operating income, respectively, from the prior year period. Strong demand from central end markets like coal, chemicals, and automotive pushed CSX’s sales higher.

Most importantly, CSX saw record operating ratio of 58.6% versus 67.4% in Q2 2017. This dramatic drop in operating ratio is notable—it’s a metric that is key to measuring a railroad’s efficiency—since it suggests that the company incurred significantly lower operating costs as a percentage of revenue.

In CSX’s Q2 earnings conference call, CEO James Foote said that creating “long-term sustainable growth” is a priority for the company. Foote also stressed that CSX is working hard to become the “best-run railroad in North America.”

CSX Corporation Price, Consensus and EPS Surprise

CSX Corporation Price, Consensus and EPS Surprise | CSX Corporation Quote

Thanks to these results, analysts have taken notice: the company has seen 12 upwards revisions in the last 60 days, driving the stock towards a Zacks Rank #1 (Strong Buy).

Additionally, our consensus estimate for fiscal 2018 has increased 30 cents over the past two months, now sitting at $3.57 per share. 2019 is looking promising too, and earnings could grow nearly 11%; estimates for next year have increased from $3.72 per share to $3.96 over the same time period.

CSX’s Q2 report also led the stock to hit all-time highs, with shares surging nearly 11% just in the month of July. Year-to-date, CSX is up well over 30%, while the stock has gained 45% in the past one-year. The company is also in a well-performing industry. Transportation-Rail is up over 14% year-to-date, and sits in the top 16% of all industries ranked on the Zacks Industry Rank.

If you’re looking for a solid transportation stock, make sure to keep CSX on your shortlist.

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