CSX (NASDAQ:CSX) has been on a roll this year. The company has outperformed the market, and it looks like the company will continue doing well in the future. In fact, the strategic network investments and improving service reliability of CSX have led to solid intermodal growth that supports highway-to-rail conversions.
Better times ahead
The domestic coal volume is expected to grow at a double-digit rate during the third quarter, with utilities continuing to rebuild inventories. CSX is recruiting front-line personnel and making selective investments in infrastructure and freight cars to grow its business efficiently and to create competitive advantages for its customers.
CSX remains confident in its ability to sustain double-digit earnings growth and margin expansion for its shareholders during 2015 and beyond. CSX also plans to further increase its capital investment by approximately $100 million to $2.4 billion to support sustainable growth for this year which in turn also enhances key infrastructure and adds freight cars to help drive long-term growth.
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- CSX 15-Year Financial Data
- The intrinsic value of CSX
- Peter Lynch Chart of CSX
CSX witnessed an increase in demand, particularly for hauling coal and crude oil during the second quarter of 2014. According to Logan Purk of Edward Jones, the rising volume numbers look appealing but, they might have been exaggerated by shipments that were delayed earlier this year.
There’s an improvement in the core earning strength of the company with the broad-based economic momentum, which is driving value for shareholders, according to CSX Chairman, President and CEO Michael Ward.
CSX has confirmed its prediction for reserved profit growth this year and double-digit profit growth in 2015 and beyond.
TheStreet Ratings team rates CSX as a buy with ratings score of A- based on the convergence of positive investment measures, which should help this stock outperform a majority of other stocks. The strength of the company can be viewed in several areas viz. robust stock price performance, revenue growth, reasonable valuation levels and solid financial position with reasonably low debt levels.
The impressive second quarter results are evidence of the sophisticated economic momentum across most markets and a major transition in the energy markets. There were impressive volume levels during this quarter that exceeded the management’s expectations coupled with maintaining stable operations and taking supplementary steps to return service to the high levels as per the customer expectations from CSX over the last few years.
There’s an exciting company growth for the shareholders. CSX added people and capacity including locomotives, freight cars and infrastructure. The total volume increased more than 8% to nearly 1.8 million loads during the quarter with solid growth in merchandise, intermodal and coal.
The solid increase in the total revenue reflects overall volume growth and increased pricing across most markets.
CSX is believed to have greater variability in both its export and domestic coal business which reflects the global market conditions and the company’s fixed variable contract structure.
Hence, CSX remains confident about the value creation for its customers compared with the rising demand for its service product which paves the path for growth and pricing above rail inflation in the long-term.
Further, ethanol shipments increased due to higher ethanol production levels owing to lower corn prices. The construction sector displayed a rebound in shipments with a growth rate of 8% reflecting the ongoing recovery of housing and construction activity. Finally, the strength in the energy-related commodities including crude oil, liquefied petroleum gas and frac sand resulted in 11% growth of the industrial sector.
All in all, CSX looks like a solid investment due to the various improvements that it is making. Investors should continue investing in the stock for long-term gains.