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Is a Beat in Store for CSX in Q4 Earnings on Cost-Cuts?

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CSX Corporation CSX is scheduled to report fourth-quarter 2019 results on Jan 16, after the market closes.

The Zacks Consensus Estimate for fourth-quarter earnings has been revised upward by approximately 1% in the past 90 days. Given this backdrop, let’s take a look at the factors that might have influenced the company’s quarterly performance.

CSX’s cost-control measures, courtesy of the precision scheduled railroading model are expected to get reflected in its bottom line. As has been the case over the last few quarters, the company’s operating ratio (operating expenses as a percentage of revenues) is expected to have improved in the fourth quarter owing to cost-containment initiatives.

However, persistent sluggishness in intermodal volumes is likely to have hampered the intermodal segment’s performance in the soon-to-be-reported quarter. The Zacks Consensus Estimate for intermodal revenues implies a 7.7% decline from the year-ago reported figure.

Additionally, coal volumes are expected to have been weak in the fourth quarter due to low domestic coal demand. The soft coal volumes in turn, are likely to have hurt coal revenues in the quarter. The consensus mark for coal revenues suggests a 24.4% plunge from the number reported in the fourth quarter of 2018.

In fact, the substantial weakness in coal volumes is expected to have weighed on overall volumes as well. Notably, at the 2019 Credit Suisse Industrials Conference, CSX stated that overall fourth-quarter volumes were down in excess of 15% as of Dec 3, 2019, primarily due to weakness pertaining to coal. The consensus mark for total volumes indicates a 6.6% decrease from the fourth-quarter 2018 reported number.

CSX Corporation Price and EPS Surprise


CSX Corporation Price and EPS Surprise

CSX Corporation price-eps-surprise | CSX Corporation Quote

Earnings Whispers

The proven Zacks model predicts an earnings beat for CSX in the fourth quarter of 2019 on the back of a perfect combination of the following two key ingredients: a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings ESP: CSX has an Earnings ESP of +0.55%. 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.
Highlights of Q3 Earnings

In the last reported quarter, CSX delivered a positive earnings surprise of 6.9%. The bottom line also inched up 2.9% year over year on lower costs. However, total revenues missed the Zacks Consensus Estimate and also decreased 4.8% year over year due to disappointing performance of the coal and intermodal segments.

Other Stocks to Consider

Investors interested in the broader Transportation sector may also consider Azul S.A. AZUL, Copa Holdings, S.A. CPA and Canadian Pacific Railway Limited (CP - Free Report) as these stocks too possess the right combination of elements to come up with an earnings beat in their next releases.

Azul has an Earnings ESP of +13.33% and a Zacks Rank of 1.

Copa Holdings is a #3 Ranked stock and has an Earnings ESP of +3.33%.

Canadian Pacific has an Earnings ESP of +0.16% and a Zacks Rank of 3. The company will release fourth-quarter 2019 earnings numbers on Jan 29.

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