Halliburton Company (HAL), CSX Corporation (CSX): How Can You Profit If the EPA Gets Tough on Coal?

Chugging along

It takes a lot of sand, pipe, steel, water, chemicals and other supplies to get natural gas out of shale formations. The railroad industry could benefit from transporting those needed materials to the fields.

One railroad, CSX Corporation (NYSE:CSX), derives about 25% of its business from coal shipments. If that declines due to EPA regulations the company will need to replace the revenue stream. One way to do that is by servicing the natural gas industry, which will move in the opposite direction.

The company is preparing for that situation by adding railcar capacity to move fracking sand to the shale fields in the Eastern U.S. Right now the capacity is at 13,000 carloads which should grow at about the same rate as rig count, projected to be around 4% per year.

CSX Corporation (NYSE:CSX) has been able to double its dividend and increase earnings by 50% over the past five years. That performance should continue going forward. The stock seems fairly priced with a P/E ratio of 13 that is well below the market average and its peers. You might want to get in at the current price.

Conclusion

So all may not be lost for the individual investor if the government cracks down on coal. You may be able to profit if natural gas takes over.

Companies like Halliburton Company (NYSE:HAL), Oneok Partners LP (NYSE:OKS) and CSX Corporation (NYSE:CSX) may benefit if the transformation occurs. Halliburton also needs to address the current issues plaguing it as well.

The article How Can You Profit If the EPA Gets Tough on Coal? originally appeared on Fool.com and is written by Mark Morelli.

Mark Morelli has no position in any stocks mentioned. The Motley Fool recommends Halliburton and ONEOK Partners, L.P. Mark is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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