On Feb 1, we downgraded our recommendation on
) to Underperform from Neutral, owing to lackluster fourth
quarter results, dismal outlook for the coal and agricultural
sectors plus strict regulatory issues.
Why the Downgrade?
CSX Corporation - one of the nation's leading transportation
suppliers that released its fourth quarter 2012 results on Jan 22
- failed to perform as per our expectation on the revenue front.
The company's results also fell year over year on lower volumes.
Following the release, the Zacks Consensus Estimates for the
first and second quarters of 2013 stand at 42 cents and 48 cents
per share, respectively. These reflect a year-over-year decline
of 3.2% and 1.7% for the first and second quarters respectively.
The company now carries a Zacks #5 Rank (Strong Sell).
Causes for Concern
For the coming months, the volumes and revenues of CSX
Corporation are anticipated to be affected by unfavorable market
demand. The company's volume outlook remains bleak with an
anticipated decline of 5% to 10% in 2013 based on weaker coal
Lower volume growth will likely result in restricted earnings
growth despite continued network rationalization, improvements in
service, safety and ongoing productivity enhancement programs.
CDN NATL RY CO (CNI): Free Stock Analysis
CDN PAC RLWY (CP): Free Stock Analysis Report
CSX CORP (CSX): Free Stock Analysis Report
GENESEE & WYO (GWR): Free Stock Analysis
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Moreover, the company's agricultural products' business will
continue to experience a downtrend given higher prices following
last year's drought. Lesser ethanol shipments and lower crop
yields will likely offset growth in phosphate shipments.
In addition, competitive pressure, a unionized workforce, heavy
investments and increased railroad regulation will also pose
significant threats to the company's growth goal.
Other Stocks Worth a Look
Other stocks within the transportation sector that are worth
Genesee & Wyoming Inc.
) - that has a Zacks Rank #1 (Strong Buy),
Canadian Pacific Railway Limited
Canadian National Railway Company
). Canadian Pacific Railway holds a Zacks Rank #2 (Buy) and
Canadian National Railway has a Zacks Rank #3 (Hold).