CSX Corporation (CSX) is a rail-based freight transportation services provider. The company offers rail services, as well as other transportation services such as rail-to-truck transfers and bulk commodity operations. The company has a $67.69 billion market capitalization.

The railroad industry has caught the market’s attention, with the Surface Transportation Board (STB) suggesting ways to revitalize freight services through railroads. To counter the supply chain issues, STB has recommended railroad companies increase their workforce to avoid delays.

Amid this, U.S. Democrat Rohit Khanna traded CSX multiple times. The U.S. Representative from California bought 505 to 1,683 shares of CSX in July 2022, with the transaction valued between $15,000-$50,000.

CSX’s stock has declined 15.9% year-to-date and 3% over the past month to close its last trading session at $31.61.

Here are the factors that could affect CSX’s performance in the near term:

Solid Financials

For the fiscal second quarter that ended June 30, CSX’s revenue increased 27.6% year-over-year to $3.82 billion. Operating income and net earnings rose marginally from the prior-year quarter to $1.70 billion and $1.18 billion. Net earnings per share improved 3.8% from the same period the prior year to $0.54.

Strong Past Growth

CSX’s revenue has grown at a 4.2% CAGR over the past three years and 3.9% CAGR over the past five years. Its net income and EBITDA have grown at CAGRs of 4.6% and 3.3% over the past three years. Its EPS has grown at a 9% CAGR over the same period.

Wide Profit Margins

CSX’s trailing-12-month EBITDA margin, net income margin, and levered FCF margin of 50.89%, 28.24%, and 19.56% are 293.4%, 318.1%, and 453.9% higher than their respective industry averages of 12.94%, 6.76%, and 3.53%.

Its trailing-12-month ROE, ROTC, and ROA of 29.66%, 11.73%, and 9.76% are 104.4%, 74.5%, and 89.8% higher than their respective industry averages of 14.51%, 6.72%, and 5.14%.

Favorable Analyst Expectations

The consensus EPS estimates of $0.50 and $0.49 for the quarters ending September and December 2022 indicate 16.3% and 16.7% year-over-year increases. Street EPS estimate for the fiscal year 2022 of $1.87 reflects an improvement of 20.6% from the prior year.

The consensus revenue estimates for the same periods of $3.77 billion, $3.75 billion, and $14.74 billion reflect rises of 23%, 9.5%, and 17.7% from their respective prior-year periods.

POWR Ratings Reflect Promising Prospects

CSX’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

CSX has a Sentiment grade of B in sync with its favorable analyst sentiments. The stock also has a B grade for Quality, consistent with its broad profitability margins.

In the 16-stock Railroads industry, it is ranked #3. The industry is rated B.

Click here to see the additional POWR Ratings for CSX (Growth, Value, Momentum, and Stability).

View all the top stocks in the Railroads industry here.

Bottom Line

In July, the company’s CEO James M. Foote stated that CSX remains focused on its meaningful growth strategy. Moreover, CSX’s wide profit margins are impressive. On top of it, the global rail freight transportation market is expected to grow to $205.30 billion by 2026. As of 2022, the United States accounted for a 34.4% share of the global market.

Given the solid prospects of the industry and CSX’s fundamental strength, I think the stock might be a wise investment now.

How Does CSX Corporation (CSX) Stack Up Against its Peers?

While CSX has an overall POWR Rating of B, one might consider looking at its industry peers, Westinghouse Air Brake Technologies Corporation (WAB) and Norfolk Southern Corporation (NSC), which also have an overall B (Buy) rating.

CSX shares were trading at $31.69 per share on Friday morning, up $0.08 (+0.25%). Year-to-date, CSX has declined -14.94%, versus a -15.44% rise in the benchmark S&P 500 index during the same period.

About the Author: Anushka Dutta

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...

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