CSX Expects Challenging Year Ahead - Analyst Blog

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CSX Corporation  ( CSX ) forecasts weather challenges to dampen earnings growth in the coming quarters. The impact would slow down its operations and shrink volumes, resulting in earnings per share (EPS) of 10 cents in the first quarter of 2014.  In addition, the company expects modest growth in full-year earnings compared to its previous estimates.

In the recent past, CSX's financials suffered a setback due to the lower coal demand. However, it expects coal demand from power plants to gradually improve as inventories are returning to normal levels from an excess. Despite modest earnings expectation for this year, the company expects to gradually improve its performance in 2015 and return to its target of double-digit EPS growth of 10% to 15%.

The company expects this growth to be driven by its strategic investments in rail infrastructure and growth in intermodal services. CSX Corp. continues to invest in expanding network and terminal capacity, and enhancing safety, service and reliability for its customers as well as gain a competitive advantage over the likes of Norfolk Southern Corp. ( NSC ) and Kansas City Southern ( KSU ).


The company expects capital investment of $2.3 billion for 2014. For 2013, CSX will utilize a portion of its capital for the maintenance of its core infrastructure, while the balance will be assigned to locomotives, freight cars and high return projects.

The company is focused on enhancing the capacity of the intermodal terminals and expansion of tracks along the River Line between northern New Jersey and the Albany, N.Y. Further, 90% of its intermodal traffic is moving in double stacking lane, which is expected to grow even further on network investments in the Virginia Avenue Tunnel clearance project in Washington DC.

CSX Corp. also expects operating ratio in the high 60s level for 2015, which looks achievable in the present market scenario. Over the long term, the company expects operating ratios to improve to the mid 60s range.

CSX Corp. currently has a Zacks Rank #4 (Sell)

Other Stocks

Better-ranked stocks in this sector include Union Pacific Corp. ( UNP ), which has a Zacks Rank #2 (Buy).



CSX CORP (CSX): Free Stock Analysis Report

KANSAS CITY SOU (KSU): Free Stock Analysis Report

NORFOLK SOUTHRN (NSC): Free Stock Analysis Report

UNION PAC CORP (UNP): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: EPS , CSX , KSU , NSC , UNP

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