CSX Corporation (CSK) is a premier transportation company. It offers rail, intermodal, and rail-to-truck transload services and solutions to customers in various markets, including energy, industrial, construction, agricultural, and consumer products.

In the second quarter, CSX's earnings per share were 8.3% higher than expected, while revenue exceeded the consensus estimate by 4%. In addition, the company’s coal revenues increased 47% in the first half of 2022, owing to increased export demand for coal. Intermodal revenues increased by 15% in the first half of 2022, owing to strong demand, primarily on the domestic front.

The stock has gained 4.1% over the past year and 4.7% over the past three months to close its last trading session at $32.63.

Here's what could shape CSX's performance in the near term:

Strategic Acquisition

In June, CSX acquired Pan Am Railways, Inc. (Pan Am), broadening its reach into the country's rapidly expanding Northeast region. James M. Foote, president and CEO, said, “This acquisition demonstrates CSX’s growth strategy through efficient and reliable freight service and will provide sustainable and competitive transportation solutions to New England and beyond.”

Robust Financials

During the second quarter ended June 30, 2022, CSX's revenue increased 28% year-over-year to $3.82 billion. Its operating income increased 1% year-over-year to $1.70 billion. The company's net income grew marginally from the year-ago value to $1.18 billion, while its EPS grew 4% from the prior-year quarter to $0.54.

Strong Profitability

CSX's trailing-12-months net income margin of 28.2% is 319.4% higher than the industry average of 6.73%. Also, its ROC, EBITDA margin, and ROA are 75.5%, 293.1%, and 91.1% higher than the respective industry averages. Furthermore, its levered FCF margin of 19.5% is 449.8% higher than the industry average of 3.6%.

Impressive Growth Prospects

Street expects CSX's revenues and EPS to rise 17.7% and 20.6% year-over-year to $14.74 billion and $1.87, respectively, in fiscal 2022. In addition, CSX's EPS is expected to rise at a 13.7% CAGR over the next five years. Moreover, the company has an impressive earnings surprise history, as it topped Street EPS estimates in all of the trailing four quarters.

Consensus Rating and Price Target Indicate Potential Upside

Of the 18 Wall Street analysts that rated CSX, 14 rated it Buy, and four rated it Hold. The 12-month median price target of $35.71 indicates a 9.5% potential upside. The price targets range from a low of $30.00 to a high of $40.00.

POWR Ratings Reflect Solid Prospects

CSX has an overall grade of B, equating to a Buy rating in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight different categories. CSX has a B grade for Sentiment and Quality. Analysts’ solid earnings and revenue growth estimates are consistent with the Sentiment grade. In addition, the company's higher-than-industry profit margins are in sync with the Quality grade.

Of the 15 stocks in the B-rated Railroads industry, CSX is ranked #5.

Beyond what I stated above, we have graded CSX for Growth, Stability, Value, and Momentum. Get all CSX ratings here.

Bottom Line

CSK has exhibited strong financial performance in the last reported quarter and is on track to deliver solid growth in the coming months based on its strategic initiatives. In addition, given the favorable analyst price target and the company's robust profitability, the stock could soar in the near term.

How Does CSX Corporation (CSX) Stack Up Against its Peers?

CSX has an overall POWR Rating of B, which equates to a Buy rating.  Check out this other stock within the same industry with A (Strong Buy) ratings: ComfortDelGro Corporation Limited (CDGLY).

CSX shares were trading at $32.76 per share on Monday afternoon, up $0.13 (+0.40%). Year-to-date, CSX has declined -12.07%, versus a -12.95% rise in the benchmark S&P 500 index during the same period.

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.

More...