CSX Corporation (NYSE: CSX) is
one of the nation's leading transportation companies, providing rail, intermodal and rail-to-truck transload services. The company's transportation network spans approximately 21,000 miles, with service to 23 eastern states and the District of Columbia. It connects to more than 70 ocean, river and lake ports. The company also has operations in real estate, resort management and equipment leasing. Burlington Northern (NYSE: BNI), Norfolk Southern (NYSE: NSC) and Union Pacific (NYSE: UNP) are competitors.
The firm pleased investors early this week, when it issued upside earnings guidance. Management now sees Q1 EPS of 70-73 cents, versus Street consensus of 63 cents. It also expects FY08 EPS of $3.36-$3.56, versus consensus of $3.05. The company boosted long-term guidance through 2010, anticipating compound annual growth in operating income of 13-15% over Y07 (10-12% prior guidance) and compound annual growth in EPS of 18-21% over Y08 (15-17% prior guidance). UBS subsequently upgraded the shares from "neutral" to "buy" and raised its price target to $66.
The stock
popped into a bullish "flag" consolidation pattern on the news. Prices frequently exit flags moving in the same direction they were traveling on entry. In this case, that would be to the upside.
Brokers recommend the issue with three "strong buys", one "buy", nine "holds" and two "underperforms". Analysts see a 17% average annual growth rate, through the next five years. The CSX PEG ratio (1.19), Price to Cash Flow ratio (10.45), EPS Growth rate (49.12%), Operating Margin (22.49%) and Net Profit Margin (12.22%) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 80% of the outstanding shares. The stock is one of those used to calculate the Dow Jones Composite and the Dow Transportation Index. Over the past 52 weeks, it has traded between $37.74 and $55.00. A stop-loss of $45.60 looks good here. Note that the firm is expected to announce Q1 results on April 16th, before the open.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold positions in any of the stocks mentioned above.
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