Revenues increased 18%, approaching $3 billion. Earnings per share from continuing operations skyrocketed 40% to $0.94. As management pointed out, distributors are exploiting railways to the advantage of their supply chains. This is cool for shareholders of CSX, who obviously are hoping their company can successfully navigate the tough economic landscape that we're all trying to find maps for. And if oil prices continue to fall, then CSX may find it easier to manage its operations.
And there's another positive. According to this source, CSX beat analyst expectations by a penny. Unfortunately, according to that same source, management believes that it will hit the lower end of the spectrum in terms of its previous guidance. CSX is looking to earn between $3.65 and $3.75 per share for the fiscal year.
Taking everything together, I'm not sure I'd want to enter CSX at this time. It is well off the 52-week high, but it's not exactly near the 52-week low, either. Even though the energy picture might be moderating for the company, and even though its business does offer a compelling transportation service, I think a macro slowdown might send shares back toward the low. And according to this source, freight volume declined by over 2%. Problems in the automotive industry are negatively affecting CSX. Heck, problems in many industries will be with us for a while. CSX will see its operations pressured. And, again, that tells me that I'd have to see a big drop in the stock to find it attractive at this point.
Disclosure: I don't own any company mentioned; positions can change at any time.
U.S. stock futures were higher Friday morning, indicating stock markets could possibly extend Thursday's rally as the dollar rose and oil prices fell further. The dollar continues to make gains on the back of growing evidence of global economic softness. Still, several economic readings are due out today, including the New York Empire State manufacturing index , capacity utilization and industrial production -- all before the opening bell.
Kohl's Corp shares could start higher as premarket indication has them trading 2.3% higher, while Nordstrom's are trading 4% lower in premarket action. Kohl's quarterly profit fell 12% from a year ago, but the retailer lifted its fiscal year profit forecast. Meanwhile, upper scale Nordstrom, reported a 21% drop in second-quarter profits and cut full year outlook.
ANF said second-quarter profit fell on lower sales of jeans and T-shirts and forecast full-year earnings per share that trailed some analysts' estimates. JCP also saw profit decline but beat estimates and issued lower guidance.
Autodesk (NASDAQ: ADSK) shares are trading 10% higher in premarket action after the design software maker reported stronger-than-forecast second-quarter earnings Thursday after the close.
"Railroads are a play on three big secular themes: the drive for increased energy efficiency, growth in coal and the agriculture boom," says Elliott Gue, a energy sector expert who has just returned from Japan where he was covering the G8 Summit.
Meanwhile, in his The Energy Srategist, he states, "Railroads are now among the most fuel-efficient forms of freight transport available." Here, he offers a bullish review of Union Pacific (NYSE: UNP).
"My long-held thesis on the group has been that the railroads are no longer totally dependent on the US economy for their growth.
"It's no longer appropriate to look at this sector as viciously economy sensitive. The traditional relationship between the broader market and the rails has been breaking down for several years, but this trend appears to be accelerating.
"In 2007, according to the Association of American Railroads (AAR), the average railroad moved a ton of freight a distance of 436 miles on a single gallon of diesel fuel. That makes freight trains roughly three to four times more fuel efficient than trucks.
"Union Pacific is the largest railroad in the US and has long been one of my favorites. The company's network is nearly 33,000 miles long and is concentrated in the West and Midwest. It also offers a convenient example of the bullish forces at work for the rails, particularly in the coal and agriculture industries.
Forget bulls and bears, today's market action is all about the monster, a red one named Elmo.
Before you click out of my post in disgust, here me out. Elmo viewers, like my 19-month-old son, learn that anything is possible provided that you have a good imagination and some simple art supplies. Another word for this is self-fulling prophecy.
When it comes to investing, sentiment comes in waves. When times are good, Wall Street analysts trip over themselves to come up with superlatives to describe the wonderfulness of the market. They then kick the market as it goes down and stays down. Then all of the sudden, pundits start arguing that things are not as bad as they seem, a phase that we are in today.
"Analysts say the stock market has been struggling in recent days to adjust its economic outlook, with some experts increasingly optimistic that the U.S. can avoid an outright recession,"The Wall Street Journal says. "On the other hand, many remain nervous that the economy will suffer a prolonged bout of weak growth that might feel to many Americans like a recession even if it doesn't fit the technical definition of one."
TheStreet.com's Jim Cramer says lots of companies now thrive with crude up here.
Oil's not a tax on everything -- it's a tax on the consumer. That's what I come down to when I see the charts this weekend and ponder what's happening in so much of industrial America.
Company after company that I examine -- the new techs, as I call them -- actually benefit from higher oil prices. Or they can pass them on with ease, because of the worldwide demand being so strong.
Take all of the companies involved with making a Boeing (NYSE: BA) (Cramer's Take): Boeing itself, Alcoa (NYSE: AA) (Cramer's Take), Honeywell (NYSE: HON) (Cramer's Take) and Precision Castparts (NYSE: PCP) (Cramer's Take) being good examples. Each of these is necessary because the new Dreamliner burns lots less fuel, and with fuel the biggest airline cost, it stands to reason that higher energy prices make the plane more desirable even at a higher price point.
When a major, metropolitan U.S. newspaper discovers a investment trend or a hot sector, count on increased share demand for companies in the sector. When that paper is one of the top three dailies, in this case The Washington Post, count on even more demand.
MOST NOTEWORTHY: Molson Coors, Knightsbridge Tankers and the Railroad sector were today's noteworthy upgrades:
Banc of America upgraded shares of Molson Coors (NYSE: TAP) to Buy from Neutral as they believe the company's joint venture with SABMiller (OTC: SBMRY) could nearly double North American profits and that risks are largely priced in shares.
Jefferies upgraded shares of Knightsbridge Tankers (NASDAQ: VLCCF) to Buy from Hold on valuation and finds the dividend yield attractive at 12.4%.
Readers of this space know that the preference here is for large cap companies, with demonstrated business models, and favorable long-term factors, that have the resources to ride-out short-term economic downturns, including recessions.
And in this category a railroad stock represent a prudent addition to a portfolio, for investors who can tolerate moderate risk.
Pick a railroad. Virtually any railroad. Odds are, you will do fine, long-term, as the nation continues to re-discover the valuable asset - - the national treasury, really - - of its railroads. (More on that latter topic, in a future blog.)
Here are the railroad plays, ranked by risk, with the top stock, BNI, being the lowest risk. A stop/loss, if one were to buy the stock, is also listed:
Union Pacific (NYSE: UNP), a leading transportation company, closed at $120.92. UNP overall option implied volatility of 33 is above its 26-week average of 29 according to Track Data, suggesting larger price risks.
Burlington Northern (NYSE: BNI), an operator of 32,000 railroad route miles, closed at $80.77. BNI overall option implied volatility of 34 is above its 26-week average of 29 according to Track Data, suggesting larger price fluctuations.
Canadian National (NYSE: CNI) closed at $46.36. CNI overall option implied volatility of 33 is above its 26-week average of 26 according to Track Data, suggesting larger price fluctuations.
Daily Options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
Retailer Kohl's Corporation (NYSE: KSS) is today expected to announce an exclusive multi-year active wear licensing partnership with Fila Luxembourg S.a.r.l., a part of Fila Korea, according to the Wall Street Journal.
According to a senior executive at Telefonica SA (NYSE: TEF), the company's efforts to obtain exclusive control of Vivo have stalled, the Financial Times reported.
News Corp's (NYSE: NWS.A) Rupert Murdoch said the company plans to replace nearly one million paid subscribers of the online Wall Street Journal with 10-15 million "who wouldn't pay a thing." Murdoch's long-term plan is to penetrate developing markets, The Australian reported.
Sidney-based Cabela's was founded in 1961 and went public in 2004. Cabela's is considered a buy by the consensus of analysts surveyed by Thomson Financial, but a closer look shows that they are split between strong buy and hold. The share price reached a 52-week high of $28.80 in early August after Cabela's second quarter results beat Wall Street expectations. The price was $23.91at the close on Wednesday. The Motley Fool points to tough same-store sales and insider trading as reasons for Cabela's "sophomore slump." In other words, high expectations from the IPO have worn off and its time to consider buying. In addition, Motley Fool, like Consumer Reports before it, likes Cabela's VISA credit card. Cabela's was also recently included on S&P Small Cap 600 index, and it made the 2007 Forbes list of 100 best mid cap stocks. Cabela's will release third quarter results on November 1.
Given investors anxiousness about the economy and hearing more gloom and doom than I think is warranted, I thought I would get back to basics with "my pal" Warren, and add to the series I started several months ago. I decided to write the series after receiving encouragement from friends and associates that read With Warren Buffett by my side ....
Today, I am writing about the concept of Durable Competitive Advantage, which is the ability to get ahead and stay ahead with a high level of certainty. It is also referred to as Sustainable Competitive Advantage.
To achieve a Durable Competitive Advantage, several factors have to be present. One is a big moat (Buffett expression) surrounding the enterprise. This usually means businesses that sell commodities where price is the primary factor in determining opportunity, have no moat as price takers. Their profit margins are not easily defendable. Another factor is barrier to entry. How easy would it be for someone to enter the same business and compete? The T-shirt business is a good example, of something without a Durable Competitive Advantage. Anyone could enter this business in one day, and they do. So unless the business has some unique concept, it does not have the promise of relatively predictable and sustainable profit margins in the future.
And right now Buffett, head of Berkshire Hathaway (NYSE: BRK.A) is into Burlington Northern Santa Fe (NYSE: BNI) in a big way. According to information filed with the Securities and Exchange Commission, Buffett has upped his stake in BNI to 14.8%.
In BNI, Buffett is hooking up with a long-term, secular trend -- the revival and expansion of the nation's railroads. Aided by strong demand for commodities in the U.S. and abroad, and by an increase in transportation services, railroad companies are thriving. BNI, and Union Pacific (NYSE: UNP), and CSX Corp. (NYSE: CSX) have all benefited from solid demand for their services in the U.S. and robust growth in emerging market economies (particularly China, India and South America).
It's a big deal whenever Warren Buffett so much as sneezes, and this morning was no different. Berkshire Hathaway's (NYSE: BRK.A) decision to boost its stake in Burlington Northern Santa Fe (NYSE: BNI) made the expected splash, and up went Burlington's stock 3%.
Back in April, Berkshire disclosed an 11% stake in Burlington, and then in May it announced investments in two other railroads: Norfolk Southern Corp (NYSE: NSC) and Union Pacific Corp (NYSE: UNP). Buffett clearly sees value in riding the railroads.
Then today came Berkshire's disclose that it had raised its stake from August 3 through August 7 to 11.5% from 11% -- which, while not exactly earth shaking, is a strong indicator that Buffett sees the recent price weakness enveloping the market as a buying opportunity. Usually when the "oracle" Mr. Buffett sees something, it is worth paying attention.
On today's STOP TRADING segment on CNBC, Jim Cramer said that Union Pacific Corporation (NYSE: UNP) is great because it is up after lowering guidance and shows how bullish the market is for secular growth stories like this. Cramer thinks railroads are in an oligopoly and is still going higher. He thinks they have pricing power where the truckers do not. On The Home Depot, Inc. (NYSE:HD), today was the first day that they have been a real buyer of the stock and this was the first day they have been a buyer. He thinks they can follow the stock up and the new management will want to keep buying per their buyback plan.
The truth is that it would be easy to come out and slam either of these since we had nearly ten Cramerless days (that may be a new term). But in a bull market, the tape speaks for itself. Even homebuilder stocks did well today, and the only person that is actually positive on homebuilders would be a man named Pangloss. Union Pacific is more than surprising that it is up like this. Home Depot is also finally coming into its own after the Dark Ages, and is actually within $1.60 of a 52-week high. Once again, you could make the argument against these but you'd be fighting the hell out of the tape.
Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.
CSX (NYSE: CSX), a transportation company whose competitors include Burlington Northern Santa Fe (NYSE: BNI), Norfolk Southern Corp. (NYSE: NSC), and Union Pacific Corp. (NYSE: UNP), reported earnings for the third quarter on Tuesday. The results weren't bad, driven in part by a drop in energy costs and an effort to keep costs under control. 
U.S. stock futures were higher Friday morning, indicating stock markets could possibly extend Thursday's rally as the dollar rose and oil prices fell further. The dollar continues to make gains on the back of growing evidence of global economic softness. Still, several economic readings are due out today, including the New York Empire State manufacturing index , capacity utilization and industrial production -- all before the opening bell.
Before you click out of my post in disgust, here me out. Elmo viewers, like my 19-month-old son, learn that anything is possible provided that you have a good imagination and some simple art supplies. Another word for this is self-fulling prophecy.
When a major, metropolitan U.S. newspaper discovers a investment trend or a hot sector, count on increased share demand for companies in the sector. When that paper is one of the top three dailies, in this case The Washington Post, count on even more demand..gif){kind=logo}
Union Pacific.gif){kind=logo}
Given investors anxiousness about the economy and hearing more gloom and doom than I think is warranted, I thought I would get back to basics with "my pal" Warren, and add to the series I started several months ago. I decided to write the series after receiving encouragement from friends and associates that read 
.gif){kind=logo}
Stock picks and pans for troubled times: RIMM, ED, ISRG, GLW, LEA, SLB, GOOG ...
Is Berkshire Hathaway better than S&P Index?
Closing Bell: Torch Passing on a Friday Rally
