CSX Corporation (NYSE:CSX) will report its earnings on 24 January 2012, the same day its east coast competitor Norfolk Southern Corporation (NYSE:NSC) is set to release its year end results. We expect the company to post good results backed by increase in volume of goods transported and improvement in pricing. Union Pacific Corporation (NYSE:UNP) reported last week that its net income rose almost 24% to $964 million, from $775 million a year ago. 
Our price estimate for CSX is $34, which is around 48% above the current market price.
Backed by encouraging signs of a recovery in the U.S. economy, the holiday season shopping grew in 2011. According to data collected by comScore, through Dec. 26th holiday season online sales rose 15% year over year to $35.3 billion.  We expect this to result in higher traffic volume for the company, which will result in greater revenue and earnings.
In the second and third quarter of 2011, railroads experienced improvement in pricing and we expect this trend to continue in the last quarter too. This can be seen in Union Pacific’s result fourth quarter results, which showed better pricing. A rise in fuel surcharges due to increase in fuel prices will likely have a positive impact on railroad’s revenues.
We expect the company to maintain focus on improving its performance efficiency. The company is also spending on enhancing its infrastructure and terminal and intermodal capacity. These expenditures will bear a long term benefit for the freight carrier as it competes with other railroads.
Railroads are often said to be a barometer of economic health, and we expect CSX to post solid results in the last quarter as the U.S. economy showed a stronger pulse and despite the deteriorating debt situation in Europe.Notes:
- Union Pacific profit jumps, sees record 2012, Reuters [↩]
- Final Christmas Push Propels U.S. Online Holiday Spending to $35.3 Billion, Up 15 Percent versus Last Year, comScore Press Release [↩]