What’s up with the competition?
With several strong companies in the sector, it is always worthwhile to review the competition even if it competes mostly for investment dollars and not work.
Union Pacific Corporation (NYSE:UNP) is the largest railroad operator with a market cap of $67 billion. Though larger than CSX, Union Pacific Corporation (NYSE:UNP) trades at a trailing PE of over 17 and a forward PE of 13.3. The company has consistently bought around $300 million-400 million of shares on a quarterly basis. That pace only amounts to roughly 2% per year. Union Pacific Corporation (NYSE:UNP) has a smaller dividend at 2%.
Norfolk Southern Corp. (NYSE:NSC) is comparable in size to CSX Corporation (NYSE:CSX) at a market cap of just under $24 billion. The company has a trailing PE of 13.8 and a forward PE of 11.7. Both PEs are comparable to CSX. Norfolk Southern Corp. (NYSE:NSC) only repurchased $138 million of stock in the Q412 quarter. That number was down from the $440 million in the last quarter of 2011 and the lowest quarterly amount of 2012. The company has a slightly higher dividend at 2.6%.
While the announcement of a $1 billion stock buyback plan sounded impressive, the details suggest a different story. With corporate authorizations at record levels, the railroad sector appears to be cutting back on buyback plans. Is this signaling a potential top in the sector?
CSX Corporation (NYSE:CSX) trades within the valuation range of the sector and below that of industry leader Union Pacific. While not expensive, the stock isn’t overly attractive and investors should probably follow the company and buy less stock.
The article Not Impressed With the CSX Buyback Plan originally appeared on Fool.com and is written by Mark Holder.
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