CSX Corporation (CSX): 3 Problems That Aren’t Going Away

Page 1 of 2

Anyone who has read much of my posts over the last year or so knows that I like railroad stocks. The industry gives investors a great way to keep up with multiple areas of the economy. The companies themselves seem poised to grow earnings as the economy recovers as well. I’ve made the argument that Union Pacific Corporation (NYSE:UNP) is the leader in the industry, but up until recently I’ve considered CSX Corporation (NYSE:CSX) and Norfolk Southern Corp. (NYSE:NSC) to be nearly interchangeable. However, CSX’s last earnings report is causing me to rethink this comparison. The company has several problems that aren’t easy to fix, and it’s becoming apparent that these challenges are here to stay.

An Economic Forecast In An Earnings Report
Is CSX Corp A Good Stock to Buy?CSX Corporation (CSX) is a stock I’ve followed for many years. My family has multiple generations that have worked for the railroad, and I’ve often used CSX’s earnings reports as a cheat sheet to see how different industries are doing. Railroads transport both raw materials and finished goods. There is a good chance that volume growth in a particular industry is tied to better performance in the future for that industry’s main players.

For instance, the fact that CSX saw a 15% volume increase in their automotive shipments should be good news for companies like Ford Motor Company (NYSE:F) and General Motors Company (NYSE:GM). Since Union Pacific saw a 14% increase in automotive volumes, and Norfolk Southern said automotive volumes were up, this is a huge tip that there is strong demand for vehicles. On the flip side, the fact that coal volumes were down 18% at CSX, 23% at Norfolk Southern, and 7% at Union Pacific, can’t be good news for investors in the coal industry. If you want to know what’s happening with the economy, pick up a railroad earnings report. However, this information is freely available to anyone, and not a good enough reason to buy shares.

Like A Domino Effect
CSX has three issues that are built upon one another. The first issue is the company is too reliant on coal shipments, which is leading to cash flow challenges. In fact, CSX’s percentage of coal volumes is higher than either of their main competitors. Coal volumes represented 25.90% of CSX’s total shipments, versus 24.48% at Norfolk Southern and 20.08% at Union Pacific. The 18% decline in coal shipments thus hurts CSX more than their competition. Though the company’s EPS was flat, their operating cash flow declined over 15% on a year-over-year basis. Compared to a 5.02% decline at Norfolk Southern, and a 4.9% increase at Union Pacific, this problem almost jumps off the page.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

10 Things The World Can’t Stand About Americans

Picture Perfect: The 6 Smartphones with the Best Cameras

The 10 Best Countries To Work In the World

A Profitable Day At The Track: 5 Tips For Betting On Horses

Tearing You Apart: 6 Bad Habits That Ruin Relationships

Learning on the Job: The 6 Biggest Mistakes Parents Make

Shopaholics Rejoice: The 12 Biggest Malls in the World

Fright Night: 10 Horror Movies Based on True Stories

Mach Mania: The 10 Fastest Jets in the World

Military Heavyweights: The 10 Countries with the Most Tanks

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

The Top 10 Richest Actors in the World

The 10 Best Airline Stocks to Invest In Before They Fly Too High

Burger Kings: The 10 Most Expensive Burgers in the World

The 10 Most Ethnically Diverse Countries in the World

The 10 Most Exclusive Credit Cards in the World

The 10 Most Expensive Cruise Ships in the World

The 10 Fastest Supercomputers in the World

The 10 Best Countries for Doing Business 2015

6 Most Expensive Fruits In The World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!