29 Oct 2010 Credit Suisse who is one of 5 best analyst on CSX updated following: CSX announced in an 8-k this morning a new growth initiative, dubbed "Grow to 65" which is an effort to achieve a full yr operating ration of 65% by NO LATER THAN 2015, brought about due to infracture improvements in network.
IMPLIED EARNINGS: A 65% operating ratio by 2015 is not a stretch, in our view. We are already modeling for a 69.2% O.R. in 2012, and if we assume 5% annual revenue growth from 2013-2015 and apply a 65% operating ratio, we arrive at 2015 EPS of roughly $7.20/share. WHAT DOES IT MEAN FOR THE STOCK? If we apply a 14x P/E multiple to the hypothetical 2015 EPS of $7.20, we arrive at a stock price of about $100 - the present value of which is - $68. This is not far off from our 12-month target price of $80, which points toward A STOCK PRICE TODAY OF ABOUT $72.
We remain positive on the stock and believe it is "undervalued." Further, we note that our implied earnings analysis assume pricing gains in the 3% range, which is NOT AN AGGRESSIVE ASSUMPTION.
On my post: 60 soon, and wall of worry gave a full yr of my opinion/outlook. We have made over 25% gain and if the stock was trading at $65 today we still have over 20% gain to bring stock price to $78.
The stock is still very cheap at $65....with p/e under 17, with accelerated earnings growth and super margin improvements warrants a p/e over 20?
Also CSX stock buy-back over $100 million per month over the next 6 (six) Months. awesome
Oil prices going up will also convert more truck to trains, and KILL planes.
Longs will be rewarded...to make a trade today is still very risky due to value....I'm 100% holding.
A big chuck of shares for the mkt to just suck up. Had to be some big buyers on the other side of the trade. It would appear that JPM, a lead bank for CSX, was involved in most, if not all of these transactions. JPM is/was a big holder of CSX shares in their own right. With CSX recently giving guidance upwards and with carloadings & Intermodal traffic continuing to increase; costs under control & CSX telling the market that it was buying back shares etc., wouldn't it be possible that CSX could be involved on the buy side of some of this volume today? Also, pls remember that they just increased their dividend and went to the debt mkt for $800M. Doesn't sound like a company to me that is going to give some downward guidance. I wouldn't doubt there was some buyback here on their part as Ward is on a mission to push this stock into the 70's.