One of America's biggest railroads, CSX (CSX 0.90%), continues to gain steam, reporting 19% year-over-year revenue growth in the fourth quarter of 2022.
After printing an all-time high of nearly $39 per share last March, CSX stock descended more than 17% to its current price in the $31-to-$32 range. So is it time to buy the dip on this railroad stock? Let's take a closer look at CSX's Q4 and full-year 2022 performance.
Revenue outpacing expenses
CSX generated more than $3.7 billion in Q4 sales, a 9% jump year over year. During the Q4 earnings call last month, CFO Sean Pelkey noted how higher fuel surcharges and robust core pricing fueled the revenue increase, "as top line gain outpaced several expense headwinds." oper
Operating income climbed to $1.46 billion, up 7% versus the same period in 2021, on 1.5 million carloads carried during the quarter. Net earnings enjoyed a 9% improvement year over year.
For the year, revenue rose 19% compared to 2021, reaching almost $15 billion. CSX's 2022 operating income of $6 billion marked an 8% year-over-year increase, with an annual operating ratio of 59.5%. Net earnings advanced 10% over 2021, closing the year at $4.2 billion.
While acknowledging that 2022 "was not at our optimum performance level," CEO Joe Hinrichs pointed out that CSX did keep the operating ratio below 60% for the year -- a lower ratio meaning a more efficient business. While CSX had previously targeted a 55% operating ratio during the third-quarter earnings call, Hinrichs declined to provide a guidance target last month.
According to Hinrichs, CSX's service metrics continue to show "real improvement" after starting "a clear upward trend in the early fall."
Costs remain high
While top-line revenue soared, expenses also ramped up for CSX last year. In the fourth quarter, expenses surged $210 million year over year, driven primarily by heightened fuel costs and inflationary pressures.
Fuel costs alone raised expenses by $129 million in Q4. Also impacting margins was "an increasing pricing environment as inflation accelerated through the year," as Executive Vice President Kevin Boone mentioned during the Q4 earnings call.
Other costs included labor and fringe expenses, which increased by $23 million as CSX replenished its workforce. With its goal of 7,000 active train and engine employees reached, CSX now looks to renew its price agreements to generate increased revenue.
NASDAQ: CSX
Key Data Points
Looking ahead
As service improves in 2023, CSX anticipates overall volume will grow. Domestic merchandise and coal shipments are expected to lead, while international import volume "is likely to be soft," according to Hinrichs.
CSX will continue to contend with cost pressures this year, but Hinrichs said he is looking to counter higher expenditures with operational enhancements. Margin improvement for the Jacksonville-based carrier will ultimately depend on its ability to gain efficiency while reducing extra costs during the current post-pandemic period.
Is CSX stock a buy right now?
According to Yahoo! Finance, the current year will show a more than 3% growth reduction for CSX. And the company has a pretty lousy track record when it comes to paying dividends, having cut its dividend payment three times over the past 30 years.
Based on the current share price of $31.65, CSX's 2022 annualized dividends of $0.40 mean a yield of 1.26%: slightly below the five-year average of 1.29%.
If CSX's dividend history is any indication, it's not yet time to initiate a position in CSX stock. 2023 will present continued challenges for the historic railroad, and the stock price could suffer in the meantime. For these reasons, prospective CSX investors are better served to wait and watch future earnings reports for a more significant recovery before considering a buy.
