CSX Corporation CSX is currently mired in multiple headwinds that are significantly impacting its prospects. Surging expenses, weak liquidity and downturn in demand are all major challenges, which, we believe, have made CSX an unimpressive investment option.
Let’s delve deeper.
CSX: Headwinds to Watch
Southward Earnings Estimate Revision: The Zacks Consensus Estimate for current-quarter earnings has moved 16.3% south in the past 90 days. For the current year, the consensus mark for earnings has been revised 9.8% downward in the same time frame. The unfavorable estimate revisions indicate brokers’ lack of confidence in the stock.
Dim Price Performance: The company’s price trend reveals that its shares have risen only 18.6% over the past 90 days compared with the transportation-rail industry’s 28.8% growth.
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Weak Zacks Rank: CSX currently carries a Zacks Rank of #4 (Sell).
Negative Earnings Surprise History:CSX has a disappointing earnings surprise history. The company’s earnings lagged the Zacks Consensus Estimate in three of the last four quarters (outpaced the mark in the remaining quarter), delivering an average miss of 3.13%.
Key Risks: CSX has been contending with persistently high operating expenses, which have increased steadily over recent years. In 2022, the company's operating expenses totaled $8.8 billion. This figure rose 3% in 2023, reaching $9.1 billion. The upward trend continued in 2024, with a more modest increase of 1.5%, bringing total expenses to $9.3 billion. Most recently, in the first quarter of 2025, operating expenses grew by 1.6% year over year, signaling continued cost pressures in the current fiscal year.
CSX has consistently seen its liquidity decline, as reflected in a steady drop in its current ratio (a measure of liquidity) over the past several years. The company reported a strong current ratio of 1.73 in 2021, but this fell to 1.56 in 2022, dropped sharply to 1.04 in 2023 and further declined to 0.86 in 2024. In the first quarter of 2025, the ratio edged up slightly to 0.88, but it still remains below the preferred threshold of 1.0. A current ratio above 1 indicates that a company holds sufficient short-term assets to cover its liabilities. CSX’s ongoing decline in this key metric signals mounting liquidity pressures that could limit its financial flexibility.
Moreover, weak demand in the coal market is hurting CSX’s performance, with coal revenues dropping 27% and volumes falling 9% year over year in the first quarter of 2025. Ongoing rail network challenges, such as crew shortages and service disruptions, are reducing operating efficiency and limiting shipment volumes. CSX is also facing pressure from elevated capital expenditures, with management projecting $2.5 billion in spending for 2025. Combined with the stock’s higher-than-average volatility, these issues are weighing heavily on CSX’s investment prospects.
Stocks to Consider
Investors interested in the Transportation sector may consider Wabtec WAB and Kirby KEX.
WAB currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
WAB has an expected earnings growth rate of 15.7% for the current year. The company has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters and missed once, delivering an average beat of 5.9%. Shares of WAB have risen 12.7% year to date.
KEX currently carries a Zacks Rank of #2.
KEX has an expected earnings growth rate of 18.7% for the current year. The company has an encouraging earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average beat of 5%. Shares of KEX have rallied 10.6% year to date.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
