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CSX Corp. Message Board

  • save_n_investte save_n_investte Jun 28, 2013 8:39 AM Flag

    Morningstar's Outlook for CSX

    This morning, Morningstar released it's latest outlook for CSX. While no one can truly foretell the future, Morningstar provides an unbiased analysis:

    CSX (CSX)
    Star Rating: 4 Stars Fair Value Estimate: $29.00 Economic Moat: Narrow Fair Value Uncertainty: Medium Consider Buying: $20.30 Although we think the railroad industry looks fairly valued overall, Eastern operator CSX still stands out as a long-term winner based on its attractive valuation and improving profitability. However, CSX is highly exposed to coal, which faces cheap natural gas as a competing utility fuel and weakened international steelmaking; while intermodal will help backfill, less coal means less income. Although near-term coal malaise dominates concerns, CSX's competitive advantages should endure. As 80% of volume is unrelated to coal, we expect the market to eventually recalibrate on CSX as a less coal-reliant enterprise. In our $29 fair value estimate, we model coal volume continuing to contract, but total volume (including coal) expanding 1% annually due to population growth, automotive, and homebuilding recovery, and aforementioned intermodal gains. Importantly, we also think the rail can achieve a 66% operating ratio by 2016, far improved from 2012's 71% reading.

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    • top.....I show this Q that chemicals are up......and petro/oil up 48.2% nearly 10k cars over q2 of 2012
      containers up 3.9% nearly 21k cars over q2 2012
      q1 overall shipments were down 2%.....and beat street estimates
      q2 up around 1.3%......and should beat street again

    • I question the narrow economic moat. It can handle bulk items in a way that only river traffic and pipelines can compete and because the way that pipeline contracts are written (3 to 5 year contracts) they lack the flexibility of rail. Container traffic is competitive, but there are a lot of other products that rail is ideal for, including a lot of petroleum and dry products and risky chemicals. Total volume expanding at a 1% rate? Not! We are coming out of the results of the recession - housing construction is resuming down here. However, CSX will still feel a pinch in the north because companies are still leaving the Rust Belt and moving to the Bible Belt Yamaha is also putting in a new assembly line close to here, moving production from Japan.

      Sentiment: Buy

    • Morningstar is wayyy overpriced on Csx.Some of the western railroads look much better.And dont have the drop off the cliff coal outlook.

      • 3 Replies to uwin2day4gd
      • Uwin, it gets worse for you. Agricultural carloadings are currently down more than coal. However, the USDA has just reported they expect huge crops in corn, soybeans, and wheat this year. If the ag traffic picks up you could see 8% carload growth with current economic conditions.

        Sentiment: Strong Buy

      • There is no doubt that operationally and commercially the BNSF is the leader of the pack. However, we can't invest in BNSF.

        If you look at the other railroads, the UP is trading at a PE of 18.23 and CSX is trading at a PE of 12.98

        CSX has seen the biggest year over year improvements in average train speed, terminal dwell time, and in the last month their carload growth has been greater than carload growth at NS and UP. Therefore I suspect they will see the greatest improvement in operating ratio and they should do well going forward in carload growth despite coal. The comps on coal are getting much better and soon should cease to be a drag. Once that happens you probably can expect 4% carload growth with our current weak economic growth. If GDP growth picks up you could easily see carload growth between 8-10%.

        CSX is a tremendous value at $23.50. If we get the economic growth in 2014 that is being forecast, CSX could easily hit $29 a share in 2014.

        You are getting a great deal on CSX because of pessimism associated with coal. I guarantee the coal industry is going to fight back. If Obama thinks he is going to replace 40% of the power production in this country in the next 4 years he is crazy. By then we'll have a new congress and a new president that might change the EPA's mandate. Even if Obama does see his plans carried out, the growth in coal use in China will far outstrip any decline in the USA and Obama has zero authority to do anything about coal exports without congress.

        Sentiment: Strong Buy

      • BNSF has the largest coal percentage 33%.

 
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34.6001+0.2801(+0.82%)9:34 AMEST

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