Article / 16 January 2014 at 10:56 GMT

CSX down 3% in after-hours trading on modest outlook

Head of Equity Strategy / Saxo Bank
Denmark

By Peter Garnry

US transport operator CSX (CSX:xnys) reported 4Q earnings per share of 42 cents versus the expected 43 cents after the market close yesterday. This result was down slightly from 44 cents in 4Q 2012. On a more positive note, volume increased six percent as the US economy continues to grow, thus supporting positive activity in the logistics industry. Initial market reaction was not positive and the stock declined three percent.

US economy to support positive view

While the initial market reaction was negative it is our firm believe that it is the wrong interpretation of the result and outlook. CSX delivered a record year with revenue for 2013 at USD 12 billion and EBITDA at USD 4.6 billion. The company says it will hire 2,000 new employees in 2014, signalling its faith in the US economy this year. 

Coal volume, which is big segment for CSX, declined in 4Q due to a decrease in shipments of domestic coal as a result of a continued low natural gas prices and utility stockpiles, which remained above target levels. The decline was partially offset by an increase in export coal which was driven by increased shipments.

Our quant model is predicting ROIC to be 8.1 percent over the next 12 months which based on the current share price means that the stock is undervalued. Momentum is also decent so our overall view is positive. With the US economy to accelerate in 2014 CSX could surprise to the upside.

 

(xcma)

-

1y
Peter Garnry Peter Garnry
The stock is up 1.2% in pre-market trading and substantial reversal from after-hours trading reaction.

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Tradingfloor.com permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Tradingfloor.com and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Tradingfloor.com is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Tradingfloor.com or as a result of the use of the Tradingfloor.com. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through Tradingfloor.com your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. Tradingfloor.com does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer

Show latest activity
Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail