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CSX Looks Past Coal; Focuses On Intermodal For Growth

By: Investor's Business Daily
Posted: 3/20/2014 6:01:00 PM
Referenced Stocks: CSX

A harsh winter has been tough on many publicly traded companies, but perhaps nowhere more so than in the railroad sector.

Still,CSX Corp. ( CSX ) is optimistic about future growth.

The company, with a market capitalization of $29 billion, provides rail, intermodal and rail-to-truck transload services to many different industries, including energy, industrial, construction and agriculture.

Earlier this month, CSX said that Q1 earnings would be negatively impacted by severe winter weather. Profit is expected to rise only 3% this year.

However, earnings are expected to ramp up in 2015, rising 14%, driven by investments in rail infrastructure and growth in intermodal services. The company has been building facilities to handle intermodal business, which includes shipping by truck, rail or ship.

Lower coal demand has hurt earnings and sales growth at CSX due to a shift to natural gas at U.S. power plants.

Fourth-quarter earnings rose 11% from a year ago while sales rose 5% to $3.03 billion. Coal volumes fell 5% in the quarter, resulting in a 9% revenue drop to $679 million. Shipments of agriculture products, chemicals and intermodal shipping containers all grew strongly. Intermodal sales rose 10%.

The U.S. oil boom continues to be good business for the railroad industry overall. In 2013, U.S. railroad operators moved 407,643 carloads of crude oil, up 74% from 2012. CSX alone carried 46,000 carloads of oil. That's supposed to increase by 50% this year.

In February, CSX declared a quarterly dividend of 15 cents a share. It currently yields 2.1%.

CSX's chart continues to show relative price strength despite less than ideal industry conditions. It's working on a cup-with-handle pattern with a buy point of 29.29, although signs of meaningful accumulation of the stock in recent weeks have been scant.