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CSX Corporation (CSX) Q1 Earnings: Is a Beat in the Cards?

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We expect CSX Corporation (CSX - Free Report) to report better-than-expected earnings in the first quarter of 2017. The company will release its results Apr 19, after market closes.

In the fourth quarter of 2016, the Jacksonville, FL-based railroad operator had delivered in line earnings. Earnings improved 2.1% on a year-over-year basis due to lower costs. Also, revenues of $3.04 billion outpaced the Zacks Consensus Estimate of $2.86 billion and improved 9% year over year owing to a 5% increase in overall volumes.

The CSX Corp. stock is up over 21% since the fourth-quarter earnings beat, outperforming the Zacks categorized Transportation-Rail industry’s gain of 5.1%.

Earnings Whispers

Our quantitative model shows that the company is likely to beat earnings because it has the perfect combination of two key ingredients. Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) have a significantly higher chance of beating earnings estimates.

Zacks ESP: The Earnings ESP for CSX Corp. is +2.33% with the Most Accurate estimate exceeding the Zacks Consensus Estimate of 43 cents per share by a penny. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: CSX Corp.’s Zacks Rank #2 increases the predictive power of ESP. In fact, the combination of CSX Corp.’s favorable Zacks Rank and a positive ESP makes us reasonably confident of earnings beat.

 Note that we caution against stocks with Zacks Ranks #4 or 5 (Sell rated) going into an earnings announcement, especially when the company is seeing a negative estimate revision.

CSX Corporation Price and EPS Surprise


CSX Corporation Price and EPS Surprise | CSX Corporation Quote

What is Driving the Better-than-Expected Earnings?

Shares of the company have been on an uptrend since the second half of January, when rumors surfaced, that CSX Corp. and a hedge fund were in talks to revamp its management to improve efficiencies. Last month, the company announced that it has inked a deal with Paul Hilal's Mantle Ridge hedge fund, thereby putting all such rumors to rest.

As part of the agreement, CSX Corp. appointed E. Hunter Harrison as its CEO. Harrison, who is highly experienced in the railroad space, intends to drive growth at CSX Corp. by slashing costs. In fact, he recently served fellow railroad operator Canadian Pacific Railway Limited (CP - Free Report) as its CEO.

Moreover, the improving scenario with respect to coal seems to be encouraging and should improve first-quarter results. The company’s cost saving and expense management measures are also expected to boost the bottom line. In fact, the company’s policy to reward shareholders through dividends and share buybacks is impressive. However, its high debt levels raise concerns, going forward.

Other Stocks That Warrant a Look

CSX Corp. is not the only company looking up this time around. We highlight below some stocks from the broader transportation sector that you may want to consider, as our model shows that it has the right combination for an earnings beat this quarter:

CH Robinson Worldwide Inc. (CHRW - Free Report) , which is scheduled to report first-quarter results on Apr 25 has a Zacks Rank #3 and an Earnings ESP of +1.25%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Kansas City Southern (KSU - Free Report) , which is scheduled to report first-quarter results on Apr 21 has a Zacks Rank #3 and an Earnings ESP of +0.86%.

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