CSX Corporation Stock Analysis
The CSX Corporation is one of the largest railroad transportation companies in the United States. Its central headquarter is located in Florida. The company provides all services related to railroad transportation, including the transportation of large and non-standard cargo.
The subsidiary company CSX Transportation, Inc. transports cargo through 23 states on the eastern side of the United States, as well as through the province of Ontario and Quebec in Canada. As a market leader, it has been operating for over 190 years. Its tracks form a network of 36,030 miles, providing access to 70 seaports, lakes, and river ports. It operates with 3,561 locomotives and 69,479 various types of freight cars.
The biggest competitor of the company is Norfolk Southern Railway because the operational territories of both companies intersect.
Business sectors
The company operates in the following sectors:
1. Freight transportation. The most diversified business. It involves the transportation of gravel, sand, gravel, metals, fertilizers, industrial and agricultural goods, paper, and chemical products. It is the highest revenue-generating business, accounting for about 55% of all income.
2. Transport of Coal. The company transports millions of tons of local coal and iron ore. The raw materials are supplied to power plants and factories. They are also transported to ports for export. This activity accounts for 16% of all income.
3. Intermodal transportation business. In this area, the company occupies a niche for transporting cargoes that trucks are no longer able to transport. The revenue from this business accounts for 16% of total income.
Finances
In 2023, the income decreased slightly more than -1%. However, the company still maintains a stable average annual growth of about 2%. For such a large company, this is good growth. With nearly 70% Gross margin, the company has high profitability indicators and is a stable cash flow generator.
The transportation company constantly requires large capital investments. These are financed through borrowed funds. Total liabilities make up 250% of Equity. As for the coverage of long-term debts, the net profit in 2023 would be sufficient for 4.84 years. That’s a pretty good indicator. They invest within their competence framework. The activities of all subsidiary companies are related.
The company is carrying out a share buyback program. Hence the high leverage ratio. However, the annual growth of EPS is conditioned not only by the share buyback program.
The company’s profit growth dynamics are stable. Seasonal impact is minimal. The growth of EPS over 10 years is almost 12%, while over 5 years it was 7.64%. The return on Retained profit was 12%. It is evident that the company should better invest Retained profit in its own business rather than, let’s say, long-term US GDP. The 10-year average ROAE was 25.51%. Very good return.
The bankruptcy risk assessment indicator Z is 3.36. This is a very high indicator, indicating that we are dealing with a strong company. Fitch Ratings has given the company a high investment grade of A-.
F_Score indicator 6. Sufficiently high investment indicator.
The company’s operations require constant capital investments to increase competitiveness. One dollar invested in LTA earns $0.84 EPS. If the company’s owners wanted to sell shares and invest today in the US 10Y bonds and receive the same return as the company provided in 2023, they should sell the shares for $40.
The result of the comprehensive analysis of the investment evaluation has somewhat diminished, but it still remains an investment:
CSX Corporation Stocks
The company’s shares are listed on the NASDAQ-GS exchange. The tickeris CSX.
The dividend yield of the company’s stocks reaches 1.27%, and their average annual growth amounts to an impressive 8.39%. In other words, the investment generates cash flows, but not to the extent that the company can be considered dividend-paying. However, those who purchased the shares at the time of the idea announcement have a dividend yield of 6.80% on their investment if no additional purchases were made during that period.
During writing:
| Indicator | Value |
|---|---|
| Price in the market | 34.16 |
| Standard deviation (risk) | 28% |
| Beta | 1.18 |
| GRAPES price | 63.94 |
| PEG | 1.93 |
| Equity risk premium | 0.93% |
| Historical 10-year CAGR of Price | 13.71% |
The range of price perspectives calculated by our method is very wide. However, it still remains profitable in the long term, and one can expect no less profitability in the future than until now.
Since the idea was announced, investors have already earned about 581% or an average annual return of 17.76%. In the future, we expect similar investment growth, or perhaps even greater. We recommend reinvesting the dividends into the same company.
Recommendations and forecasts from third parties
Artificial Intelligence:
CSX Corporation is one of the largest railroad transportation companies in the United States, and its operations are crucial to the country’s economy. The company specializes in freight transportation by rail, and its network spans many states and major cities.
Financial analysis:
- Price: At the time of writing, the price of CSX shares is approximately $34.16.
- P/E ratio: The company’s P/E ratio is 18.77, indicating that investors pay $18.77 for each dollar earned by the company.
- Dividend yield: CSX pays dividends, with a yield of 1.4052%.
Stock Price Forecast:
Analysts claim that the forecast for CSX stock prices is positive, with an average 12-month price forecast of around $37.33, which is about 5.63% higher than the current stock price.
Risk factors:
- Geopolitical influence: International trade may be affected by geopolitical events, which could impact CSX’s operations.
- Economic fluctuations: Recessions or a slowdown in economic growth may reduce the demand for freight transportation.
A touch of humor: If CSX were a school student, it would probably be the one who always has a backup plan when the lesson doesn’t go according to plan – „What if today we’re not hauling coal, maybe we’re… hauling teachers?”
Investing in any company always entails some level of risk, but based on the latest market data and analysts’ assessments, CSX Corporation appears to be an attractive investment.
Tradingview consensus:
Stock Analysis consensus:
Stocktwits consensus:
Price chart
Conclusions
We see that the company remains attractive to investors. Therefore, we do not plan to decrease its portion in the portfolio. On the contrary, we will increase it, taking advantage of market discounts, particularly during corrections. During corrections, the decrease in stock price translates to an increase in your investment yield. Reinvesting dividends into the same stock also enhances yield. That’s the gist of our strategy and tactics for investing in these stocks.