CSX is in the most worrisome position among the North American railroads. Coal accounts for 20% of the company's revenue. The company faced significant headwinds when the price of coal collapsed in 2009 amidst a sharp recession, which would have caused its operating margin to collapse were it not for an improving operating ratio thanks to cost improvements in all parts of the business.
Even though more than one-fifth of CSX's revenue will eventually disappear, the stock trades at 14.4 times earnings. This is likely because the company is growing its share of export coal; export coal now represents about 6% of revenue, compared to hardly any just seven years ago. Although export coal may temporarily offset the decline in domestic coal volume, the inevitable mass export of U.S. natural gas will lead to the demise of all of CSX's coal revenue. Therefore, investors should avoid including coal revenue in the stock's valuation.
NS is a little more dependent on coal then CSX. It's pretty close between the two. Still it'll be at least 5 years or so for the effects of the EPA to have a sizable impact on closing coal fired power plants. Coal still powers 40% of this country.
... suppressed coal revenues, higher depreciation expenses and labor inflation will likely cloud these positive effects. Further, competitive pressure, a unionized workforce and increased railroad regulation will also pose significant threats to the company’s growth.