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CSX (CSX) Up 10.1% Since Last Earnings Report: Can It Continue?

Zacks Equity Research
Keysight (KEYS) closed at $88.22 in the latest trading session, marking a -1.34% move from the prior day.

It has been about a month since the last earnings report for CSX (CSX). Shares have added about 10.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is CSX due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

CSX Surpasses Revenue Estimates in Q4

CSX's  fourth-quarter 2018 earnings of $1.01 per share matched the Zacks Consensus Estimate. Meanwhile, the bottom line soared 57.8% year over year despite rise in costs.

Total revenues of $3,143 million surpassed the Zacks Consensus Estimate of $3,130.6 million and increased 9.8% year over year as well. Results were driven by a 3% volume expansion, higher fuel recoveries and pricing gains among other factors.

Fourth-quarter operating income augmented 11% year over year to $1,249 million. Operating ratio (operating expenses as a percentage of revenues) improved to 60.3% from 60.7% in the prior-year quarter despite total expenses escalating 9% from the year-ago period.

Segmental Performance

Merchandise revenues climbed 10% year over year to $1,915 million in the quarter under review. Moreover, merchandise volumes increased 4% year over year.

Coal revenues expanded 8% year over year to $586 million in the reported quarter. Coal volumes also grew 3% year over year.

Intermodal revenues rose 4% year over year to $492 million. On a year-over-year basis, volumes inched up 2%.

Other revenues grossed $150 million, up 39% year over year.

Liquidity & Share Buyback

CSX exited the fourth quarter with cash and cash equivalents of $858 million compared with $401 million at the end of 2017. Long-term debt totaled $14,739 million compared with $11,790 million at 2017-end.

At the end of the year, net cash provided by operating activities was $4,641 million compared with $3,472 million in the year-ago period. The company’s board has authorized a new $5-billion share repurchase program following early completion of the previous one.




2019 Outlook

For 2019, the company expects revenues to improve in low single digits. The projection includes sluggish growth of the intermodal segment due to rationalization of intermodal lanes. Notably, the top line augmented 7% in 2018.

However, on a positive note, the company expects to achieve its operating ratio target of 60% this year itself instead of 2020 expected earlier, on the back of operational efficiency.

Capex for the year is anticipated between $1.6 billion and $1.7 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

Currently, CSX has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, CSX has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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