CSX Earnings Preview: CSX Likely To Beat 2019 Earnings Expectations Despite Intermodal Slowdown

by Trefis Team
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CSX Corporation (NASDAQ: CSX) is a railroad company engaged primarily in freight transportation in the Southeast, East, and Midwest regions of the U.S. CSX is slated to release its Q4 and full-year 2019 results on January 16, 2020. For 2019, Trefis estimates that the company will report revenues of $12.0 billion, as compared to $12.3 billion in 2018, primarily due to an expected decline in the intermodal business. Our revenue estimate is in line with the consensus estimate of $12.0 billion. Looking at the bottom line, we expect EPS of $4.18 (vs. consensus estimate of $4.16) due to an expected decline in expenses, thereby driving growth in net income margin. We believe that in-line revenues and better than expected earnings for 2019 will very likely result in CSX’s stock moving slightly up once earnings are announced. In fact, our forecast indicates that CSX’s valuation is $76 per share, which is slightly above its current price of not quite $75. Look at our interactive dashboard analysis ~ CSX Pre-Earnings: Will CSX’s 2019 Earnings Beat Consensus, Resulting In Stock Price Moving Higher Post Earnings Release? ~ for more details.

(1) Revenues expected to be in line with the consensus estimate

  • Trefis estimates CSX’s 2019 revenues to be $12.0 billion, in line with the consensus estimate of $12.0 billion.
    • Merchandise $7.6 Bil (63%)
    • Coal $2.2 Bil (18%)
    • Intermodal $1.7 Bil (14%)
    • Others   $0.6 Bil (5%)
  • Revenues expected to decline 1.8% from $12.3 billion in 2018 to $12.0 billion in 2019.
  • The decline is expected to come primarily from the company’s Intermodal segment, amid the company’s ongoing efforts to rationalize its lanes.
  • CSX’s revenues have grown at an average annual rate of 5.2% between 2016-2018. However, we expect the growth rate to decline to 0.7% over 2019-2020.
  • Our interactive dashboard analysis, CSX Revenues: How Does CSX Corporation Make Money?, provides a detailed view of the company’s revenues along with our forecasts.

(2) EPS likely to beat consensus estimates

  • CSX’s 2019 earnings per share (EPS) is expected to be $4.18 per Trefis analysis, slightly higher than the consensus estimate of $4.16 per share.

Total Revenues:                  $12.0 Bil
– Total Expenses:                $8.7 Bil
————————————————-
Net Income:                        $3.4 Bil
÷ Shares Outstanding:     805 Mil
————————————————-
EPS:                                      $4.18
Consensus:                          $4.16
Surprise:                              $0.02

  • EPS expected to increase 8.8% from $3.84 in 2018 to $4.18 in 2019.
  • As we forecast CSX’s Revenues to decline at a lower rate compared to its Expenses in 2019 (3.2%), it will result in growth in CSX’s Net Income Margin from 27% to 28%.
  • For 2020, we believe that a steady revenue growth coupled with a slightly higher growth in expenses will result in the net income margin figure to slightly decline to 27.7%.
  • Our interactive dashboard analysis, How Does CSX Corporation Spend Its Money, provides a detailed view of the company’s expenses.

(3) A trailing P/E multiple of 18.3x looks appropriate for CSX’s stock, and it is largely in line with the current implied P/E multiple of 18.0x

  • We use our full cash flow model for CSX to arrive at a P/E multiple of 18.3x for a price estimate of $76
  • Note: P/E Multiples are based on Share Price for end of the year, and reported (or expected) Adjusted Earnings for the full year.

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