CSX (CSX) Up 10.8% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for CSX (CSX). Shares have added about 10.8% 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 drivers.
Earnings Beat at CSX in Q2
CSX's earnings of 50 cents per share (excluding 4 cents from non-recurring items) beat the Zacks Consensus Estimate of 47 cents and improved 25% year over year.
Total revenues of $3,815 million outperformed the Zacks Consensus Estimate of $3,642.2 million. The top line increased 28% year over year on the back of higher revenues in almost all markets, driven by pricing gains, fuel surcharge and contribution from the acquisition of Quality Carriers. Overall revenues per unit increased 27%.
Second-quarter operating income climbed 1% to $1,703 million. The operating ratio (operating expenses as a percentage of revenues) improved to 55.4% from 43.4% in the prior-year quarter, with operating expenses increasing 63% year over year.
Segmental Performances
Merchandise revenues climbed 10% year over year to $2,101 million in the reported quarter on the back of price and higher fuel surcharge revenues. Merchandise volumes remained almost flat at $657 million. Segmental revenue per unit increased 10%.
Intermodal revenues augmented 18% year over year to $602 million. Volumes rose 1% year over year. Strength in the international business was partially offset by lower domestic shipments due to continued equipment challenges during the reported quarter. Segmental revenue per unit increased 17%.
Coal revenues ascended 54% year over year to $651 million in the reported quarter. Coal volumes decreased 3% due to mine disruptions and an outage at CSX’s Curtis Bay export facility. Segmental revenue per unit surged 58%.
Effective third-quarter 2021, CSX introduced a segment called Trucking comprising the operations of Quality Carriers, acquired by CSX last year. Revenues from the segment totaled $259 million in the second quarter. Other revenues jumped 32% to $202 million in the reported quarter. The uptick was owing to higher intermodal storage and equipment usage.
Liquidity, Dividends and Buyback
CSX exited the second quarter with cash and cash equivalents of $724 million compared with $1,936 million at the end of March 2022. Long-term debt totaled $15,974 million compared with $$16,019 million in March 2022. As of Jun 30, 2022 CSX rewarded its shareholders through buybacks and dividends with $1,499 million and $215 million, respectively.
Outlook
CSX continues to expect double-digit revenue and operating income growth for the full-year 2022. High export coal prices during the first half of the year, with fuel prices going higher, have enabled management to stick to its previously unveiled guidance. CSX still expects capital expenditures to be approximately $2 billion in 2022.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
VGM Scores
Currently, CSX has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. 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. It comes with little surprise CSX has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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