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Bear of the Day: CSX (CSX)

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CSX Corporation CSX saw its  revenue fall in the fourth quarter as coal remains a headwind. This Zacks Rank #5 (Strong Sell) is expected to see little earnings growth in 2020.

CSX is an east coast railroad based in Jacksonville, Florida. It provides rail, intermodal and rail-to-truck transload services to customers in many markets including energy, industrial, construction, agricultural and consumer products.

A Beat in the Fourth Quarter

On Jan 16, CSX reported its fourth quarter 2019 results and beat the Zacks Consensus by $0.02, reporting $0.99 versus the consensus of $0.97.

It was the second beat in a row, after the company had posted a rare miss in the second quarter of 2019.

Revenue fell 8% to $2.89 billion due to lower volumes and a negative mix from coal market headwinds.

However, expenses fell 9% to $1.73 billion, drive by continued efficiency gains.

Guidance Light for 2020

Volumes are expected to be flat to down 2% in 2020 as coal is expected to remain a headwind at least through the first half of 2020.

As a result, the analysts have been lowering both 2020 and 2021 estimates.

For 2020, 7 estimates were lowered, and one raised, in the last 30 days which pushed the Zacks Consensus down to $4.20 from $4.46 just 90 days. That's earnings growth that is up just 0.7% as the company made $4.17 in 2019.

These cuts are the reason for the Zacks Rank of Strong Sell.

Estimates for 2021 were also cut in the last month, pushing the 2021 Zacks Consensus down to $4.54 from $4.79 during that time period. That's a rebound in earnings.

Shares Up Year-to-Date

Investors haven't soured on the rails, even as some have had a slowdown in volumes. CSX shares are up 5.9% year-to-date even as the estimates were being cut.

It still has attractive valuations, with a forward P/E of 18.1.

It also pays a dividend, currently yielding 1.3%.

The Zacks Rank is terrible in the entire industry. None of the railroads are a Zacks Rank #1 (Strong Buy) or #2 (Buy) stock.

Canadian Pacific Railway CP, Kansas City Southern KSU and Norfolk Southern (NSC - Free Report) have the best Ranks and all are Zacks Rank #3 (Holds).

Look for a turnaround in the earnings estimates on this group around the middle of the year.

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