Merchandise Freight To Aid CSX’s Q3 Performance

CSX Stock (NYSE: CSX) will report its Q3 2024 results on Wednesday, Oct 16. We expect the company’s revenues to come in at $3.7 billion and earnings at $0.49 per share, marginally ahead of the consensus estimate. CSX should benefit from modest volume gains, while the average revenue per unit metric may remain soft. Our interactive dashboard analysis of CSX’s FY 2024Q3 Earnings Preview has more details on the company’s revenues and earnings for the quarter.

Trends To Watch Out For In Q3

CSX should benefit from volume and pricing gains for merchandise and intermodal, while the average pricing growth for coal may remain tepid.  Lower fuel surcharges may offset some of the growth at merchandise and intermodal. The company should see an improvement in operating ratio, driven by better cost management. Revenue growth clubbed with margin expansion will likely result in an earnings growth in the high-teens.

How Did CSX Perform In Q2?

Looking at the previous quarter, CSX’s revenue of $3.7 billion in Q2 was flat y-o-y, partly due to lower fuel surcharges and a decline in export coal prices. Overall volume was up 2%, while the average revenue per unit fell 2% during the quarter. The company saw its operating margin deteriorate by 50 bps y-o-y to 39.1%. CSX’s shares outstanding declined 2% amid share repurchases, which helped the company post earnings of $0.49 per share, flat y-o-y.

What Does This Mean For CSX Stock?

We think CSX stock is fairly priced at levels of $34. We estimate CSX’s Valuation to be $36 per share, close to its current market price. At its current levels, CSX stock is trading at 18x forward expected earnings of $1.94 per share for the full year 2024. The 18x figure aligns with the stock’s average P/E multiple over the last five years.

Notably, the increase in CSX stock over the last three years has been far from consistent and has largely been as volatile as the S&P 500. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is less volatile. And it has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics.

While CSX stock looks appropriately priced, it is helpful to see how CSX’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

[1] Returns as of 10/11/2024
[2] Cumulative total returns since the end of 2016

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