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What's In Store for CSX Q2 Earnings Amid Coronavirus Woes?

CSX Corporation CSX is scheduled to report second-quarter 2020 results on Jul 22, after market close.

The Zacks Consensus Estimate for the company’s second-quarter earnings has been revised downward 5.5% to 69 cents per share in the past 60 days. Moreover, it has an impressive earnings history, having outperformed estimates in three of the preceding four quarters (missing the same in one). It has a trailing four-quarter positive earnings surprise of 3.8%, on average.

Let’s delve into the factors that are likely to get reflected in the company’s June-quarter results.

Factors Likely at Play

Intermodal volumes are likely to have been affected during the second quarter due to coronavirus-led closure of operations in China. Notably, imports at the major U.S. retail container ports have been declining rapidly since the outbreak. The Zacks Consensus Estimate for intermodal volumes indicates a 12.4% decline from the March-end reported figure.

We expect CSX’s overall volumes for the to-be-reported quarter to have been dented by coronavirus-induced supply-chain disruptions. The Zacks Consensus Estimate for total volumes suggests a 17.8% decline sequentially.

Coal volumes are expected to have been soft in the second quarter due to low domestic coal demand. Further, reduced coal volumes are likely to have had affected coal revenues in the quarter. The consensus mark for coal revenues suggests a 16.3% drop from the number reported in first-quarter 2020.

Improved operational efficiency, courtesy of the precision scheduled railroading model, is expected to have contributed to the company’s bottom line in the quarter to be reported.

CSX Corporation Price and EPS Surprise

CSX Corporation Price and EPS Surprise

CSX Corporation price-eps-surprise | CSX Corporation Quote

The railroad operator’s operating ratio (operating expenses as a percentage of revenues) is likely to have improved in the quarter to be reported owing to cost-controlling initiatives. Notably, lower the value of this metric, the better.

Earnings Whispers

The proven Zacks model does not conclusively predict an earnings beat for CSX this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of a positive earnings surprise. However, that is not the case here as elaborated below. You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings ESP: CSX has an Earnings ESP of -4.06% as the Most Accurate Estimate is pegged at 66 cents, which is lower than the Zacks Consensus Estimate of 69 cents per share. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: CSX carries a Zacks Rank #3, currently.

Highlights of Q1 Earnings

CSX reported first-quarter 2020 earnings of $1 per share, which beat the Zacks Consensus Estimate of 92 cents. However, the bottom line slipped approximately 2% year over year due to decline in revenues. Total revenues of $2,855 million lagged the consensus estimate of $2,877 million and declined approximately 5% year over year due to lower coal and other revenues.

Stocks to Consider

Investors interested in the broader Transportation sector may consider United Airlines UAL, Southwest Airlines LUV and Air Lease Corporation AL, as these stocks possess the right combination of elements to beat on earnings this reporting cycle.

United Airlines has an Earnings ESP of +25.24% and a Zacks Rank #3. The company will release second-quarter 2020 results on Jul 21.

Southwest Airlines presently has an Earnings ESP of +23.80% and is a Zacks #3 Ranked player. The company will release second-quarter 2020 results on Jul 23.

Air Lease has an Earnings ESP of +23.32% and is Zacks #3 Ranked at present. The company will release second-quarter 2020 results on Aug 6.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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