Will CSX Stock Rise Post Q3 Results?

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CSX Corporation (NYSE: CSX) is scheduled to report its Q3 2022 results on Thursday, October 20. We expect CSX to post revenue and earnings in line with the street expectations. The company should continue to benefit from a shift toward lower-cost transportation alternatives. Furthermore, our forecast indicates that CSX stock is undervalued at its current levels, as discussed below. Our interactive dashboard analysis of CSX Earnings Preview has additional details.

(1) Revenues expected to align with the consensus estimates

  • Trefis estimates CSX’s Q3 2022 net revenues to be around $3.78 billion, reflecting a 15% y-o-y growth, in line with the $3.76 billion consensus estimate.
  • Higher inflation has resulted in some shippers turning to low-cost alternatives, such as railroads. With rising costs, the company should be able to expand its average revenue per carload, boding well for its top-line growth.
  • Looking back at Q2, the company reported a 28% rise in revenue to $3.82 billion, led by a solid 28% rise in average revenue per carload, while the total volume of carloads didn’t see any growth.
  • Our dashboard on CSX Revenues has more details.
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(2) EPS likely to be marginally above the consensus estimates

  • CSX’s Q3 2022 earnings per share (EPS) is expected to be $0.52 per Trefis analysis, just two cents above the consensus estimate of $0.50.
  • CSX’s net income of $968 million in Q2 2022 reflected a 31.5% rise from its $736 million figure in the prior-year quarter, led by a 28% sales growth and around 60 bps rise in operating margin to 43.6%.
  • For the full-year 2022, we expect the adjusted EPS to be higher at $1.94 compared to $1.68 in 2021.

(3) CSX stock looks undervalued

  • We estimate CSX’s Valuation to be around $36 per share, which reflects a significant 35% premium to the current market price of $27.
  • This represents a forward P/E ratio of 18.5x based on our $1.94 2022 EPS forecast for CSX.
  • At its current levels, CSX is trading at 13.7x forward expected earnings, compared to the last three-year average of 19.2x, implying that CSX stock is undervalued.
  • CSX stock has fallen 29% this year. The demand for railroad business can primarily be linked to economic growth. The current high inflationary environment, rising interest rates, fears of slowing economic growth, and weakness in the broader markets have weighed on railroad stocks, including CSX.

While CSX stock looks undervalued, it is helpful to see how CSX’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

Furthermore, the Covid-19 crisis has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised at how counter-intuitive the stock valuation is for CSX vs. Amerco.

With inflation rising and the Fed raising interest rates, among other factors, CSX stock has fallen 29% this year. Can it drop more? See how low CSX stock can go by comparing its decline in previous market crashes. Here is a performance summary of all stocks in previous market crashes.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

 Returns Oct 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 CSX Return 0% -29% 121%
 S&P 500 Return 0% -25% 60%
 Trefis Multi-Strategy Portfolio 0% -26% 192%

[1] Month-to-date and year-to-date as of 10/12/2022
[2] Cumulative total returns since the end of 2016

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