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CSX Corporation (CSX), Norfolk Southern Corp. (NSC): Profits Flow From Southeast Logistics Hubs

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Investing opportunities in logistics seem ripe these days. Indications are that people are now getting more inclined to spend, and thus, more goods need to get moving. Among the recent indicators of zealous U.S. consumer sentiment came from a Thomson Reuters/University of Michigan preliminary assessment for May. It showed that overall, the index of consumer sentiment rose in early May to its highest level in almost six years at 83.7; this benchmark was at 76.4 in April.

Added confidence can be drawn from expectations at Fannie Mae that the U.S. economy shall re-accelerate in this year’s second half with the labor sector regaining traction. The mortgage-finance company foresees 2.2% overall growth in 2013, thus improving on the modest 1.7% growth achieved in 2012.

CSX Corporation (CSX)

Play with trucks and trains

The hot trail on logistics now currently leads to southeastern U.S., according to a DC Velocity report, These “logistics hotspots” are home grounds for rail company CSX Corporation (NYSE:CSX), headquartered in Jacksonville, FL. Another large railroad firm, Virginia-based Norfolk Southern Corp. (NYSE:NSC), has several major installations in Georgia.

The U.S. Southeast is also abode for the trucking mogul, J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT), based in Lowell, AR. Another trucking giant, Thomasville, NC-based Old Dominion Freight Line (NASDAQ:ODFL), likewise has much of its fortunes staked in the Southeast, specifically in its Piedmont-Triad, NC domain.

Hospitable business environment

Per the DC Velocity report, operating from and within this region provides several advantages, one of which is its population density, estimated to constitute 45% of the population in the U.S. Competitiveness in freight costs is definitely a plus, with the Southeast boasting of a robust supply chain infrastructure anchored on efficient connectivity of rail, highways, and seaports. Industrial peace is likewise an attraction, as the Southeast is largely non-union. Moreover, relatively abundant commercial-industrial real estate and state incentives for businesses locators make the Southeast hospitable to logistics operators.

These advantages can best be seen in CSX Corporation (NYSE:CSX), whose Jacksonville home base has a strategic seaport. This is but one component to the company’s 21,000-mile transport network which also links to the Southeast ports in Miami, Savannah, GA, and Charleston, SC. All told, CSX Corporation (NYSE:CSX) has 70 port terminals not only along the Gulf and Atlantic Coasts, but also at the Mississippi River and the Great Lakes-St. Lawrence Seaway.

Strong financials

CSX Corporation (NYSE:CSX)’s solid foundation in the Southeast was manifest in its record 2013 first-quarter operating income of $875 million. Net income for the quarter rose to $459 million, or $0.45 per share, from $449 million, or $0.43 per share, a year earlier. The slowdown in the company’s coal business was offset by advances in other segments such as those from intermodal and merchandise, resulting in $3 billion in revenue for this year’s first quarter.

Like in CSX Corporation (NYSE:CSX), coal shipments at Norfolk Southern Corp. (NYSE:NSC) were sluggish during the 2013 first quarter, but it nonetheless achieved higher earnings on the strength of goods transport and intermodal revenue. Norfolk earned $450 million, or $1.41 per share, for the quarter, up 10% from $410 million, or $1.23 per share, in the 2012 first quarter. A non-recurring $60 million gain, or $0.19 per share, was included in the 2013 first-quarter results.

J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT) likewise, had  a strong 2013 first quarter, increasing its operating revenue by 11% to $1.29 billion from $1.1 billion a year earlier. Net earnings in its most recent quarter rose year over year to $73.3 million, or a diluted EPS of $0.61, from $67.7 million, or $0.57 per diluted share.

Old Dominion Freight Line (NASDAQ:ODFL)’s 2013 first quarter was robust too, as the company posted a 30.4% increase in net income to $40.6 million from the $31.1 million reported a year-earlier. Its diluted EPS rose 30.6% to $0.47 from $0.36 in the previous year’s first quarter. Revenue for 2013’s first quarter rose 7.1% year over year to $532.6 million from $497.1 million.

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