CSX Corporation (NASDAQ: CSX) is a rail, intermodal, and rail-to-truck transloading firm. It has a 21,000-mile rail network that connects commercial markets in Canada with the northeastern, southeastern, and midwestern United States. Traditional rail service is provided by the corporation, as well as transportation of intermodal containers and trailers, automotive and agricultural products, chemicals, and minerals. CSX is one of the largest transportation firms in the United States, with headquarters in Jacksonville, Florida.
CSX Financial Performance
CSX’s revenue growth between 2018 and 2021 can be ascribed to a roughly 2x jump in its Trucking & Other segment sales to $1.2 billion in 2021. Last year, CSX bought Quality Carriers, a trucking company specializing in bulk liquid chemical transportation, boosting revenue growth in recent quarters.
The company’s freight segment witnessed a 1% increase in average revenue per carload over this time, which was more than offset by a 3.5% decrease in carload volume. As a result, income from coal, intermodal, and merchandise freight declined 2.6% to $11.4 billion in 2021, down from $11.7 billion in 2018. However, so far, 2022 has been strong, and we predict a significant 15% increase in revenue from these three divisions, primarily driven by increased average revenue per carload, while carload volume will likely remain level year on year.
Furthermore, the company’s operating ratio has continually improved, falling to 55.3% in 2021 from 60.3% in 2018. However, due to greater inflation, costs have risen this year, and the operating ratio has grown by more than 500 basis points year on year to 59.0% for the nine-month period ending September 2022. The company’s bottom line increased 35% in 2021 to $1.68 from $1.24 in 2018, and we estimate it to increase to $1.92 in 2022. This is significantly higher than the company’s 2% sales increase during the same time, owing mostly to improved operating margins and share buybacks.
Will CSX recover soon ?
When it comes to value, we believe CSX stock has minimal space for expansion. We estimate CSX’s valuation at $34 per share, representing less than a 10% increase over its current market price of $32, meaning that investors would be better suited waiting for a downturn to enter CSX stock for bigger long-term returns. CSX stock is currently selling at 17x projected earnings forecast of $1.92 per share, compared to the prior four-year average of 18x.
While CSX stock appears to be well valued, it is useful to evaluate how CSX’s peers perform on key criteria. Further useful comparisons for businesses across industries can be found at Peer Comparisons.
Furthermore, the Covid-19 problem has resulted in numerous pricing discontinuities, which can provide appealing trading opportunities. For example, you’ll be amazed at how diametrically opposed the stock valuations of CSX and Amerco are.
CSX stock has plummeted 16% this year due to growing inflation and the Fed boosting interest rates, among other issues.
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