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
Comments
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

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Top 10 Highest Paying Jobs in the World

Most Expensive Day-Care in New York City

The 10 Cheapest Places to Retire Abroad

Top 10 Most Expensive Luxury Cars in the World – 2014

Killer Small Business Ideas

The 50 Best Personal Finance Blogs

Most Expensive Apartments in New York City

Bloodiest UFC Fights Ever Fought

Most Expensive Rum Brands 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!