) plans to build an intermodal facility in Quebec. The
construction will include an intermodal rail terminal using 89
acres of land, connecting CSX' intermodal network across the U.S.
We expect the new development project to benefit the company's
growing freight business and thereby lead to revenue accretion.
CSX Corp. continues to invest in expanding network and terminal
capacity, as well as enhancing safety, service and reliability
for its customers. The company launched the National Gateway, a
multi-year public-private infrastructure initiative, which will
significantly improve the efficiency of the freight network
between the Mid-Atlantic ports and the Midwest. Total project
costs are approximately $850 million, of which CSX Corp. expects
to contribute approximately over $550 million.
Additionally, CSX Corp. entered into a deal with Florida state
regulators to deploy computerized rail operation called SunRail.
The contract entails CSX to sell a 61-mile rail corridor to the
State of Florida and in exchange receive exclusive rights to
operate on the SunRail track. The new system is expected to start
operating in 2014.
Going forward, CSX plans to invest the $500 million sale
proceeds of the deal for the development of Florida rail
infrastructure. Overall, the company invested $2.2 billion in
2012 and estimates the investment of $2.3 billion in 2013.
We expect these investments to remain accretive over the long
term, supporting volume growth. However, given the current
economic backdrop, these investments can weigh on the margins in
the foreseeable future until there is significant improvement in
the market fundamentals that will drive revenues upward.
Besides CSX, other companies that accelerated their capital
investments in railroad development include
Union Pacific Corporation
Norfolk Southern Corp.
). Last year, Union Pacific invested approximately $3.7 billion
and Norfolk Southern spent approximately $2.2 billion.
Another stock worth considering within the sector is
Genesee & Wyoming Inc.
) that holds a Zacks Rank #1 (Strong Buy rating).
Currently, CSX Corporation has Zacks Rank #5 (Strong Sell)
CSX CORP (CSX): Free Stock Analysis Report
GENESEE & WYO (GWR): Free Stock Analysis
NORFOLK SOUTHRN (NSC): Free Stock Analysis
UNION PAC CORP (UNP): Free Stock Analysis
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