CSX Corporation (CSX) Could Become One of Warren Buffett’s Favorites (Part 6)

Page 1 of 2

CSX Corporation (NYSE:CSX)In the search for long-term investment opportunities, I am quite interested in the sustainable businesses that are cheaply or reasonably valued on the stock market. Using StarMine data, Thompson Reuters’ senior analyst John Kozey listed 28 businesses that could become one of Warren Buffett’s favorites. In this article, I will cover one industrial company on that list. It is CSX Corporation (NYSE:CSX), a transportation service company.

Business snapshot

CSX is considered to be one of the U.S. leading transportation companies, providing different transportation services such as traditional rail service, intermodal containers transport and trailer transport. CSX is operating in three main business segments including the merchandise business, the coal business and the intermodal business. The majority of 2012 revenue, $6.7 billion, or 57% of the total revenue, was generated from the merchandise business, which transported around 42% of the total 2012 volume of the company. The coal business ranked second, with $3.17 billion in revenue, or 27% of the total 2012 revenue while the intermodal business generated about $1.64 in revenue.

A cyclical business that is improving

The transportation business is quite cyclical, meaning that the business fluctuates along with the ups and downs of the overall economy. Indeed, CSX Corporation (NYSE:CSX) experienced a significant drop in both revenue and income in 2009, followed by steady improvement since 2010.



CSX Revenue TTM data byYCharts

As the general economy improves, its top and bottom lines exceeded those levels reached in 2008. Compared to 2008, the revenue has increased by 13.9% while the net income has risen by 28.5%, due in large part to lower operating expenses. Since 2008, its operating ratio has been declining. The operating ratio equals annual operating expenses divided by annual revenue, excluding non-recurring items. For the past five years, its operating ratio dropped from 75.6% to only 70.6%. Furthermore, income investors would like CSX a lot due to its consistent increasing dividends. In the past ten years, its dividend has increased from $.07 in 2003 to $.54 in 2012. The dividend yield is currently staying at 2.14%.

Historically, CSX has consistently generated positive cash flow. In 2012, the operating cash flow was $2.95 billion and the free cash flow was $605 million. The consistent cash flow allows the business to leverage substantially. As of December 2012, it had nearly $9 billion in total stockholders’ equity, $1.37 billion in cash and short-term investments and more than $9.8 billion in debt. In addition, CSX Corporation (NYSE:CSX) had more than $8 billion in deferred tax liabilities, which are considered interest-free loans from the government.

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 Click to see monthly returns in table format!

Lists

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

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!