CSX Corporation
(
CSX
), one of the leading rail transportation companies, is slated to
release its second quarter 2012 results on Tuesday, July 17. The
current Zacks Consensus Estimate for second quarter earnings per
share is pegged at 47 cents, representing an annualized growth
estimate of 1.98%.
First-Quarter Flashback
CSX Corp.'s first quarter earnings of 43 cents surpassed the
Zacks Consensus Estimate as well as year-ago earnings of 35 cents,
driven by higher profits on solid pricing and fuel surcharges as
well as higher volumes from Intermodal and Merchandize segments.
Revenues increased 6% year over year to $2,966 million but fell
below our expectation.
Agreement of Estimate Revisions
For the second quarter, of the total 22 estimates, none move
upward or downward in the last 7 days. However, over the last 30
days, 3 estimates moved upward and 2 moved down.
Similarly, no change in revisions was registered in the 24
estimates for fiscal 2012 in the last 7 days. Over the last 30
days, 3 estimates moved north while none moved south.
For fiscal 2013, out of 24 estimates, no movement was registered
in either direction in the last 7 days. Over the last 30 days, one
estimate moved up and 2 moved down.
Based on the estimate revisions we can project that analyst
remains encouraged about the near-term prospects of CSX Corp.
despite the domestic utility coal headwinds that continue to affect
the company.
We believe that favorable rail industry pricing, fuel recoveries
and operational improvement will aid CSX Corp.'s top-line growth
and drive earnings going forward. We remain optimistic on
accelerated growth in the company's major segments, namely
Intermodal, Merchandize and Coal.
Moreover, we expect that strength in highway-to-rail conversion,
continued success in the UMAX interline container program and new
market opportunities will aid growth going forward. International
volume is expected to be driven by new business gains, aided by an
improved portfolio of service and network offerings coupled with
the new Maersk deal. In Merchandize, industrial shipments are
expected to remain strong driven by growth in Automotive and Metals
products.
Oil and gas-related growth will aid metal and chemical
shipments. The construction sector is expected to improve, driven
by the recovery in multi-family housing. Coal volumes are expected
to remain strong, offsetting lackluster domestic utility volumes
with higher utility coal exports, mostly to Asian and European
markets.
Magnitude of Estimate Revisions
Over the last 7 and 30 days, the magnitude of the second quarter
estimate revisions remained unchanged at 47 cents.
Similarly, for 2012, the Zacks Consensus Estimate remained
static at $1.83 over the last 7 and 30 days.
For 2013, no change was observed over last 7 and 30 days and the
earnings estimate remained constant at $2.07.
Earnings Surprises
With respect to earnings surprise, over the trailing four
quarters, CSX Corp. had a positive surprise with the average being
3.29%.
The upside potential for the second quarter remains flat at
0.00%. Similarly, for fiscal 2012, the Zacks Consensus Estimates'
downside risk is measured at 1.64%. For 2013, upside
potential for the stock is 0.97%.
Our Recommendation
Despite CSX's strong performance in the first quarter supported
primarily by pricing improvement compared to volume growth, we
remain concerned about the company's near-term headwinds related to
coal demand. Further, the company's capital intensive nature and
unionized workforce, increased competition as well as strict
railroad regulation and stiff competition from railroads like
Norfolk Southern Corp.
(
NSC
) also keep us on sidelines.
Hence, we maintain our long-term Neutral recommendation on
CSX Corp. supported by Zacks #3 Rank (Hold).
CSX CORP (CSX): Free Stock Analysis Report
NORFOLK SOUTHRN (NSC): Free Stock Analysis
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