CSX Earnings: Will Railroad Stocks Keep Soaring Higher?

The railroads are all doing well, with CSX, Norfolk Southern, and Union Pacific all at all-time record highs. What sets CSX apart? Find out here.

Jan 12, 2014 at 3:02PM

CSX (NASDAQ:CSX) will release its quarterly report on Wednesday, and like peers Union Pacific (NYSE:UNP) and Norfolk Southern (NYSE:NSC), CSX shares have hit their best levels ever recently. Yet among its competitors, CSX arguably has even further room for growth if it can take better advantage of some of the opportunities that Union Pacific in particular has capitalized on in recent years.

One of the most surprising things about how resilient CSX and other railroad stocks have been is that conditions have been terrible in many of the commodities markets that account for much of railroads' traditional shipping volume. In particular, CSX and Norfolk Southern have had some geographical disadvantages compared to Union Pacific that have made them even more vulnerable to adverse conditions in the coal industry. But even with poor coal volume weighing on revenue, CSX and its peers have looked to other sources for shipping growth. Let's take an early look at what's been happening with CSX over the past quarter and what we're likely to see in its report.

Photo credit: Wikimedia Commons/Nate Beal.

Stats on CSX

Analyst EPS Estimate


Change From Year-Ago EPS


Revenue Estimate

$3.00 billion

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

Can CSX earnings grow faster this quarter?
In recent months, analysts have had mixed views on CSX earnings, raising their full-year 2013 estimates by $0.04 per share but cutting their 2014 projections by $0.02 per share. The stock has powered ahead, rising 15% since early October.

CSX's third-quarter results show how the railroad industry has adapted to changing conditions among its customers. The company overcame a 9% drop in coal-related revenue by boosting its movement of chemical and intermodal shipments, leading to a 4% jump in total sales from the year-ago quarter and sending earnings up a modest 2% year-over-year. In particular, the chemicals necessary for hydraulic fracturing and other unconventional energy production methods at shale plays across the continent have opened up opportunities for CSX as well as Union Pacific and Canadian rivals Canadian Pacific and Canadian National, and CSX is working hard to use that demand to keep its traffic up.

Yet even with lucrative markets like automobile shipping and intermodal transport, CSX's geographical disadvantage causes problems. Union Pacific, BNSF, and Kansas City Southern (NYSE:KSU) have more direct access to the West Coast than CSX and Norfolk Southern do, making it easier to serve high-growth Asian markets and the high volumes of trade that flow around the Pacific Rim.

The big hope for CSX is that markets for thermal coal could potentially rebound this year. With natural gas prices having hit bottom and actually rebounded substantially from 2012 lows, power plants are likely to keep current levels of coal demand stable. CSX has focused on low-cost coal areas in the Powder River and Illinois Basins to stay competitive, and that could help keep coal volumes flat or growing slightly from 2013 figures. At the same time, CSX could also benefit if exporters of coal take greater advantage of demand in the global coal market.

In the CSX earnings report, watch to see how the company's tests of natural-gas powered train engines are progressing. With the ability to switch from higher-cost diesel, changing fuel could help CSX and its peers cut their expenses and boost their profits -- a welcome sign that could send stocks climbing even further.

Get the right stocks in your portfolio
It's no secret that investors tend to be impatient with the market, but the best investment strategy is to buy shares in solid businesses and keep them for the long term. In the special free report, "3 Stocks That Will Help You Retire Rich," The Motley Fool shares investment ideas and strategies that could help you build wealth for years to come. Click here to grab your free copy today.

Click here to add CSX to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter: @DanCaplinger. The Motley Fool owns shares of CSX. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers