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CSX (CSX) Up 10.3% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for CSX (CSX - Free Report) . Shares have added about 10.3% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is CSX due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Earnings Beat at CSX in Q1

CSX Corporation reported first-quarter 2020 earnings of $1 per share, beating the Zacks Consensus Estimate of 92 cents. However, the bottom line slipped approximately 2% year over year due to a drop in revenues.

Meanwhile, total revenues of $2,855 million lagged the consensus estimate of $2,877 million and declined approximately 5% year over year owing to lower coal and other revenues.

First-quarter operating income dropped 3% year over year to $1.18 billion. Operating ratio (operating expenses as a percentage of revenues) improved to 58.7% from 59.5% in the prior-year quarter, with total expenses declining 7% from the year-ago period. Costs reduced primarily due to increased efficiency.

Segmental Performance

Merchandise revenues inched up 3% year over year to $1,927 million in the quarter under review. Merchandise volumes increased 2%.

Coal revenues plunged 25% year over year to $405 million in the reported quarter. Coal volumes also contracted 15% year over year due to lower domestic and export coal volumes.

Moreover, Intermodal revenues slid 1% year over year to $422 million. Volumes were flat year over year, with international volumes dwindling due to coronavirus-led closure of operations in China.

Other revenues too fell 40% to $101 million in the reported quarter.

Liquidity & Share Buyback

The company exited the first quarter with cash and cash equivalents of $1,995 million compared with $958 million at the end of December 2019. Long-term debt totaled $16,477 million compared with $15,993 million at 2019-end. As of Mar 31, 2020, net cash provided by operating activities was $1,178 million compared with $1,173 million in the year-earlier period.

During the first quarter, the company repurchased 9 million shares at an average price of $64.75.

Suspension of Guidance

Taking the uncertainty surrounding coronavirus into consideration, CSX withdrew financial outlook. To combat the low-volume scenario caused by the health crisis, the company is controlling expenses as well as evaluating future capital spending.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -7.23% due to these changes.

VGM Scores

Currently, CSX has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise CSX has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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