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CSX Builds New Intermodal Facility - Analyst Blog

Posted
6/4/2013 6:28:00 PM
By: Zacks.com
Referenced Stocks:CNI;CP;CSX;NSC

One of the leading rail freight carriers, CSX Corporation ( CSX ) has started construction of its Quebec Intermodal terminal, which is expected to begin operations in 2015. The $107 million project is expected to facilitate CSX in tapping business opportunities from shippers resorting to intermodal rail between Montreal and Quebec City.

Given the growing importance of rail intermodal, rail infrastructural development has been the focus of all investments undertaken by the railroads. In 2012, another major railroad, Norfolk Southern Corp ( NSC ), sought expansion plans worth $2 billion within its territory.

Norfolk's expansion strategies were fueled mostly by the development of the energy sector, including the gas exploration projects in Marcellus and Utica shale plays as well as ventures associated with coal and power generation. Over the coming years, it plans to introduce 32 energy-related projects in 14 states under its service areas.

Coming back to the recent development, apart from CSX, rail freight carriers like Canadian National Railway Co ( CNI ) and Canadian Pacific Railway Ltd ( CP ) have also undertaken terminal and capacity development. While Canadian National collaborated with Indiana Rail Road Company to set up an intermodal terminal in Indianapolis, Canadian Pacific started operations in its latest intermodal terminal at Saskatchewan's Global Transportation Hub in Regina.

All these recent events only lead to the fact that railroads are experiencing growth in their intermodal services. We expect all these investments to remain accretive over the long term, supporting volume growth. However, given the current economic backdrop, these investments can likely weigh on the margins until there is a significant improvement in market fundamentals that will drive revenues upward.

Currently, CSX Corporation has Zacks Rank #3 (Hold) rating.



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