GuruFocus Premium Membership

Serving Intelligent Investors since 2004. Only 96 cents a day.

Free Trial

Free 7-day Trial
All Articles and Columns »

CSX: This Railroad Company Is on Track to Get Better

July 20, 2014 | About:
jaggom

jaggom

0 followers

Railroad organization CSX's (CSX) performance has been inconsistent. One of the reasons behind its sluggish performance this year was a powerless final quarter earnings report that was released in mid-January. CSX had missed profit estimates because of powerless coal shipments, and its shares slipped the most in more than two years.

Positive expectations

CSX expects positive and ideal conditions in most of its markets this year, determined by the merchandise, industrial, housing, and construction sectors in terms of volume and margins. The merchandise sector, which includes the agribusiness sector as well, had witnessed significant development in volumes last year and the same pattern is relied upon to proceed with this year as well. Increases in grain and ethanol shipments have boosted the merchandise segment so far and a similar pattern is normal going ahead.

Extending limit

Also, CSX is redesigning Murphy-Brown's Rose Hill food factory to a 90-auto collector of unit trains and has effectively changed over most of its Prestage Farms office to 90-auto units. These upgrades will help CSX to better oversee volumes and lessen lead times to customers. CSX now has a sum of 24 food and fare facilities spotted on its system or a joining short line that can get 90-auto trains. The essential point of these facilities is to load a whole 90-auto unit prepare inside 15 hours.

Moreover, CSX as of late finished the construction of Gavilon's lift in Mauzy to enhance shipments of its 90-auto loads. CSX now has access to 43 elevators that will assist in stacking 90-auto trains. This move will absolutely help the organization in stacking up higher volumes and lessen costs. CSX has also dispatched a Grain Express Load/Unload program for its 90-auto unit that offers monetary incentives of $75 per auto discount to its selected customers.

This activity will unquestionably get more customers and increase its customer base. Be that as it may, the standpoint for its phosphate and compost products in terms of volumes remains impartial because of high stock levels and dubious ware estimating. Yet overall, CSX plans to invest $2.3 billion in center infrastructure to benefit as much as possible from the diverse opportunities that could come its direction.

Intermodal prospects

CSX's intermodal transportation has been a key development driver so far. Determined by expressway to-rail ((H2r)) conversions and a significant development in its existing customer base and service item enhancements, intermodal has done exceedingly well. Going ahead, CSX plans to make strategic investments in both terminals and networks, as the organization anticipates an estimated 9 million truckload good fortune. CSX is also investing in train and cargo cars so as to take care of business demand.

CSX will dispatch another terminal this year in Montreal, subsequently extending the limit of the northwest Ohio global center that is a piece of the H2r activity to upgrade service unwavering quality. These moves should deliver better results for the organization as they will support development and estimating in the long run.

Blend of positives and negatives

Then again, CSX expects that its coal fare volume will decline in the first quarter of fiscal 2014, while domestic coal volume is required to develop year over year. The organization estimates coal volumes in the mid-30 million ton run this year, which shows soft worldwide economic situations, essential in the warm market. Notwithstanding, CSX is wanting to keep lower rail evaluating for coal to keep up its competitiveness in this segment.

Then again, CSX's car business is doing admirably as the organization recognized significant development in light vehicle creation. CSX anticipates robust development in North America light vehicle generation in the current year as well, which should keep driving interest from this segment. The organization also expects positive development in chemicals, as the expansion in the domestic oil and gas industry has made a sustainable open door for these products.

Conveying worth

CSX had paid a profit of $0.59 per share in 2013 that was up 9% in comparison to the previous year. The organization expects to pay a profit in the scope of 30% to 35% of trailing twelve months' earnings, and it will survey the sum yearly after the first quarter. CSX had also purchased back $353 million value of shares last year and on track to finish its present $1 billion approval by the start of the second quarter of 2015. CSX has returned substantial amounts of cash to shareholders through both dividends and share repurchases, and this is an extraordinary reason why you should consider the stock.

Conclusion

CSX is modest when contrasted with the rest of the railroad industry. Its P/E degree of 15.5 is low than the industry normal P/E proportion of almost 20, and its profit yield of 2.10% is also truly solid. Also, as we saw, CSX returns a decent measure of cash to shareholders through buybacks as well. Joining this with the positive trends that CSX expects in its business this year, it could make for a decent long haul wager.

As far as its performance this year is concerned, improvements in intermodal and limit expansion should help CSX recover its business on track, making it a stock worth considering for your portfolio.


Rating: 0.0/5 (0 votes)

Comments

Please leave your comment:


Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
Free 7-day Trial
FEEDBACK