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Why Should Investors Consider CSX’s 1Q16 Earnings Preview?

Could CSX Beat Earnings Estimates Again in 1Q16?

Upcoming 1Q16 results

CSX Corporation (CSX) will release its 1Q16 earnings before the US market opens on April 13, 2016. The company will hold a conference call with securities analysts and institutional investors at 8:30 a.m. EST on April 13 to discuss the results.

2015 was quite a turbulent year for the transportation industry, particularly railroads. The strong US dollar and weakness in global commodity prices put pressure on railroads’ top line. However, as of January 2016, there have been expectations of better economic activity and stability in commodity prices in the second half of 2016, which has boosted railroad stocks.

As you can see in the above graph, CSX’s return has dropped by 25% over the last year. CSX is one of the seven Class I railroads operating in the United States. Let’s compare CSX’s stock return with the returns of its peer group:

  • Norfolk Southern (NSC), CSX’s archrival, delivered a return of -22%

  • Kansas City Southern (KSU), the smallest Class I railroad, delivered a return of -18%

  • Major western US carrier Union Pacific (UNP) delivered a return of -27%

  • Canada’s largest railroad, Canadian National Railway (CNI), delivered a return of -8%

  • Canada’s second-largest railroad, Canadian Pacific (CP), delivered a return of -29%

  • The United States’ largest short-line operator, Genesee & Wyoming (GWR), delivered a return of -37%

Investors interested in railroad stocks could consider the iShares Transportation Average ETF (IYT). Major US railroads make up 20.7% of the portfolio holdings of IYT.

Why investors should read this series

CSX has focused on enhancing its intermodal revenues. The company may announce more terminal openings on the intermodal side. Almost one-fifth of its total revenues are tied to coal operations. Recently, the company undertook a series of measures to address the coal woes.

The impact of coal’s struggles was discussed by CSX chief financial officer Frank Lonegro on February 17, 2016. According to the company’s press release, “the intensifying coal headwinds and the impact of the strong U.S. dollar and low global commodity prices that impacted CSX in 2015 are expected to further challenge results in 2016. CSX expects coal volume to decline more than 20 percent and most other markets to continue posting year-over-year declines this year.”

In this series, we’ll provide a preview of the company’s earnings. With this preview, investors will be able to compare the company’s actual performance with analysts’ expectations.

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