On Jul 29, we maintained our Neutral recommendation on
). The company is characterized by strong Merchandise and
Intermodal segments along with recovery of the construction
sector and expansion of network and terminal capacity. However,
the company's performance in the near term might be impacted by
certain headwinds. This Jacksonville-based leading transportation
firm carries a Zacks Rank #3 (Hold).
We believe that favorable rail industry pricing and operational
improvement will aid CSX's top-line growth and drive earnings
going forward. Management aims to lower its operating ratio in
the high 60s range by 2015 and to mid-60s in the long term, aided
by volume expansion, cost control measures and pricing gains.
Management has adopted a number of strategic steps to achieve a
high productivity level in the coming days. These include
improvement in car cycle times and reduction in overtime and
other associated labor costs, enabling the company to lower rent
expense, materials usage and labor cost per employee while
delivering a superior service to customers.
We also appreciate CSX's consistent investments in expanding
network and terminal capacity, and enhancing safety, service and
reliability for its customers. Additionally, the company enjoys a
number of collaborations with the regulatory bodies and displays
a healthy financial position.
However, suppressed coal revenues, higher depreciation expenses
and labor inflation will likely cloud these positive effects.
Further, competitive pressure, a unionized workforce and
increased railroad regulation will also pose significant threats
to the company's growth.
For the third and fourth quarters of 2013, the respective Zacks
Consensus Estimate for earnings is 43 cents and 42 cents per
share. This reflects year-over-year decline of 3.3% and 1.5%,
Companies operating within the sector that are worth taking note
) with a Zacks Rank #1 (Strong Buy).
American Railcar Industries Inc.
Trinity Industries Inc.
) are Zacks Rank #2 (Buy) stocks.
AMER RAILCAR (ARII): Free Stock Analysis
CSX CORP (CSX): Free Stock Analysis Report
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