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CSX (NYSE: CSX), a railway company whose colleagues include Burlington Northern Santa Fe (NYSE: BNI), Norfolk Southern Corp. (NYSE: NSC) and Union Pacific Corp. (NYSE: UNP), issued its Q1 report on Tuesday after the bell. As one might imagine, there was a drop in both sales and net income. The top line declined by 17%. The bottom line, on an adjusted basis (taking into account an item from last year's similar quarter), dropped 23% to $0.62 per share.
The economy is still taking its toll, obviously. Volumes were down during the quarter. However, the market sometimes cares about only one thing: beating expectations. CSX actually beat the analyst expectations of $0.51 per share. This significant difference led traders to push shares of CSX higher by 6.5% during Tuesday's after-hours session.
Management is doing well with cost control. Plus, lower energy expenses helped drive the company's performance.
How should you put this beat, and the stock's investment potential, into perspective?
Well, CSX might have some momentum behind it. According to AOL quotes, at the time of this writing, CSX has risen over 20% over the one-month period. With the market starting to discount better times ahead, and with this kind of performance, I'd say CSX has an interesting chance of being a good trade on a pullback. And when you consider that CSX has gone up over 90% over the five-year frame, you definitely get the feeling it could be a decent stock to investigate for a long-term portfolio.
However, I'm still having a bit of a hard time believing this rally, so I'll say again: buy this one on weakness, not on strength. You want margins of safety in this market. Always.
Disclosure: I don't own any company mentioned; positions can change without notice.
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