NASDAQ:CSX Stock and Profitability Discussion

[Jeff Smith]

DISCLOSURE AND ADMIN NOTE: This thread is for the discussion of CSX Stock, profitability, etc. RAILROAD.NET makes no representation or warranties as to the prospects of this stock or company; all risk is aed by investors only. Publication of insider information is punishable under law. The views expressed herein are thoCSX se of the member only.

[Jeff Smith]

https://www.washingtonpost.com/business/energy/csx-leads-industrial-earnings-off-the-rails/2019/07/19/0168f348-aa60-11e9-8733-48c87235f396_story.html?noredirect=on&utm_term=.9f1197572ed4]WashingtonPost.com[/url]

CSX Leads Industrial Earnings Off the Rails

It’s going to be unbearably hot across much of the U.S. this weekend, but the early returns on industrial earnings have been decidedly cool. A nearly 30% run in CSX Corp. shares heading into its second-quarter earnings report suggested this was a company where investors thought they could find shelter amid a growing body of worrisome manufacturing data. They were wrong. The shares slumped more than 10% the day after CSX reversed a forecast for low single-digit growth in revenue this year and predicted instead that revenue would dip as much as 2%. The East Coast railroad says it’s being cautious, but the time for conservatism is when you start the guidance-giving process, so that strikes me as an inadequate explanation for such a deep cut. CEO James Foote said the macroeconomic backdrop was one of the most “puzzling” he’s ever experienced and that there are no concrete signs of improvement in weak coal, intermodal and industrial volumes.
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[mmi16]

It seems like in the march to PSR - with EHH and then Foote showing the door to the prior institutional knowledge of CSX - the institutional knowledge of the Finance Department has left the building and the replacements have not learned the former's pencil sharpening techniques so the CSX ALWAYS beat 'The Street' on the financial estimates.

Bad quarters are to be expected from time to time - to not 'beat the street' is a failing of monumental proportions.

[Jeff Smith]

The Fool's take: Fool.com (Motley Fool)

Is CSX a Buy?
It was a disappointing set of earnings, but is the stock worth buying now, or should investors dump it?

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What moves CSX stock
Railroad stocks are cyclical and always will be, and their revenue will follow trends in the economy. However, in recent years, the wide-scale adoption of Precision Scheduled Railroading (PSR) has led to significant improvements in profitability.

In a nutshell, PSR is a set of principles whereby railroads tend to run fixed scheduled trains from point A to point B rather than a hub and spoke approach. Even though CSX's revenue growth is undoubtedly going through a cyclical slowdown, PSR has brought about significant improvements in its operating ratio (operating expenses divided by revenue, therefore a lower number is better), and that's helping to counteract weakness in revenue growth.

The impact of these productivity improvements (train velocity increased and terminal car dwell was reduced -- both positives) can be seen in the reduction in operating expenses during the second quarter. Ultimately, this helped CSX offset a fall in revenue and meant the railroad could increase its operating income in the quarter.
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[Jeff Smith]

https://seekingalpha.com/article/459399 ... ortunities

CSX: A New Strategy And Buying Opportunities
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Hinrichs aims to reverse this trend and revitalize the rail industry by prioritizing customer service and fostering positive relationships with employees and clients alike. While his goal is somewhat obvious (it should be his goal), he is getting tailwinds from supply chain re-shoring, as I discussed in this article (among many others).

"Our emphasis is on the employees and the customer service," Hinrichs said in an interview in his 15th-floor office at CSX's Jacksonville, Florida, headquarters. "If we take care of the employees and they're engaged and excited and motivated to deliver great service to our customers, the shareholders will be rewarded for that."

What's interesting is that Hinrichs aims to reverse the traditional approach of tying growth targets to US industrial production, which has often lagged behind the broader economy driven by consumer spending, and instead wants to increase rail carloads at the same rate as the US economy, which expanded 2.1% in 2022.
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[Safetee]

The 2023 first quarter CSX figures are in. Traffic volume on CSX is down 1% compared to 22.That doesn't seem that bad on the face of it. Coal traffic ,the dying traffic lion roars one more time, is actually up 19%.
The supposed to be growth traffic, you know, the service that's supposed to capture tons of traffic off the highways and make up for the ultimate demise of coal, intermodal, was down 9%.
The bottom line for the carrier that thrives on prosperity through avoiding growth is that while volume was down 1% in the first quarter, revenues were magically up 9%. We can safely assume that the increase in revenue comes from increasing rates.

[QB 52.32]

When considering 2023 first quarter CSX figures, the important segment of merchandise, be it for volume, revenue or growth, has to be factored into the mix. It's 44% of CSX's 1Q23 volume (vs. 44% intermodal, 12% coal); 66% of CSX's 1Q23 revenue (vs 15% intermodal, 19% coal); and provided 71% of CSX's 1Q23 revenue growth (vs. 29% coal).

As such, merchandise volume growth in the Ag/Food; Auto; Minerals; Forest; and Metals markets impacted revenue growth.

So, putting aside the pitfalls of assumptions, safe to say that more than half of their 1Q23 year-over-year revenue growth was from volume growth and that's with intermodal facing headwinds from truck overcapacity among soft domestic truckload demand and lower international container shipments.

[Jeff Smith]

https://finance.yahoo.com/news/csx-corp ... 14072.html

Is CSX Corporation (NASDAQ:CSX) Potentially Undervalued?

Let's talk about the popular CSX Corporation (NASDAQ:CSX). The company's shares saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$34.34 and falling to the lows of US$30.19. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether CSX's current trading price of US$30.63 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at CSX’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
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[Jeff Smith]

https://finance.yahoo.com/news/heres-wh ... 00243.html

Hold, and coal is NOT dead?

Here's Why Investors Should Hold on to CSX Stock Currently

CSX Corporation’s CSX measures to reward its shareholders, even in this uncertain scenario, are encouraging. Upbeat coal revenues and liquidity represent other tailwinds. However, intermodal woes and high operating costs represent major challenges.
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CSX’s top line is benefiting from higher export coal volumes, domestic intermodal shipments and volume growth as well as pricing gains. Evidently, coal revenues increased 36% in 2022 driven by strength in export coal. High export coal prices and fuel surcharge revenues are expected to bolster the top line in the near term.
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CSX’s operations are being hurt by supply chain disruptions, including labor and equipment shortages. Weakness in the merchandise segment due to semiconductor shortage is concerning. In the first nine months of 2023, intermodal revenues declined 13% year over year.
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[QB 52.32]

Coal is not dead, but is less relevant than a decade ago. In 2013 it generated 24% of revenue on 18% of unit volume whereas first 9 mos. 2023 17% of revenue on 12% of unit volume, undoubtedly with even greater impact in diminished contribution to the bottom line.

First 9 months 2023, merchandise traffic revenue is up 5% on 2% volume gains, largely driven by automotive 18% revenue growth on 17% volume growth, metals 13% revenue growth on 8% volume growth, and minerals 12% revenue growth on 8% volume growth. Merchandise generated 59% of revenue on 43% of unit volume and coal revenue is up 3% on 10% volume growth.

CSX’s operations are being hurt by supply chain disruptions, including labor and equipment shortages. Weakness in the merchandise segment due to semiconductor shortage is concerning. In the first nine months of 2023, intermodal revenues declined 13% year over year.

These risks seem a bit outdated by a year or more. There are no equipment shortages and no anticipated major disruption in auto production due to semiconductor shortage. During this fourth quarter of 2023 CSX is anticipating continued merchandise performance into 2024 including within the auto market though with some weakness now showing with metals traffic. It'll be interesting to see what 2024 will bring with intermodal, less relevant to CSX than NS though important nonetheless, and with growth potential from capital investments in the I-95 corridor, Pan Am acquisition, and Meridian & Bigbee CPKC gateway not yet realized.

Heading into next year sounds as if CSX anticipates labor cost inflation headwinds with some pockets of continuing labor shortages. Their new COO is pursuing fuel efficiency and train start utilization gains in response, respectively.