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Will Cost-Reduction Initiatives Benefit CSX in Q4 Earnings?

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CSX Corporation (CSX - Free Report) is slated to report fourth-quarter 2017 earnings results on Jan 16 after the market closes.

Last quarter, the company reported earnings of 51 cents per share, in line with the Zacks Consensus Estimate. The bottom line came in at 6.3% higher than the year-ago figure. Revenues of $2,743 million missed the Zacks Consensus Estimate of $2,769.4 million. However, the top line inched up 1.2% year over year owing to core pricing gains.

Let’s see, how things shape up this earnings season.

Why a Likely Positive Surprise?

Our proven model shows that CSX is likely to beat on earnings this quarter on the back of a perfect combination of the two following key ingredients:

Zacks ESP: CSX has an Earnings ESP of +0.14%, representing the difference between the Most Accurate estimate and the Zacks Consensus Estimate. A positive Zacks ESP serves as an indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: CSX carries a Zacks Rank #3 (Hold). Note that stocks with a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have significantly higher chances of beating estimates.

Conversely, Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement.

CSX Corporation Price and EPS Surprise

 

CSX Corporation Price and EPS Surprise | CSX Corporation Quote


What is Driving the Better-than-Expected Earnings?

The company’s cost-cutting efforts to drive the bottom-line growth are expected to aid results in the fourth quarter.

Additionally, the improved coal and intermodal scenario is anticipated to boost results in the quarter. Evidently, the Zacks Consensus Estimate for fourth-quarter coal revenues is pegged at $534 million, higher than $514 million reported in the previous quarter. While the consensus mark for intermodal revenues stands at $488 million, above the reported base of $446 million in the third quarter.

The company’s efforts to reward shareholders through dividend payments and buybacks are also impressive. In October, the company’s board authorized $1.5 billion in share repurchases, an addition to the $1.5-billion program recently completed.

However, a sluggish automotive production may hamper results in the to-be-reported quarter. The company’s high-debt levels are also worrisome.

Other Stocks to Consider

Investors interested in the broader Transportation sector may also consider American Airlines Group, Inc. (AAL - Free Report) , Allegiant Travel Company (ALGT - Free Report) and JetBlue Airways Corporation (JBLU - Free Report) stocks with the right combination of elements to deliver an earnings beat in their next releases.

American Airlines has an Earnings ESP of +2.18% and a Zacks Rank #3. The company is expected to report fourth-quarter earnings on Jan 26.

Allegiant has an Earnings ESP of +0.06% and a Zacks Rank of 3. The company is scheduled to report fourth-quarter earnings on Jan 31.

JetBlue has an Earnings ESP of +3.46% and the stock is a Zacks #3 Ranked player. The company will report fourth-quarter earnings on Jan 25. You can see the complete list of today’s Zacks #1 Rank stocks here.

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