QUOTE AND NEWS
Benzinga  Apr 1  Comment 
CNBC Fast Money's Pete Najarian spoke on the show about unusually high options activity in CSX Corporation (NYSE: CSX). There was significant trading activity in the April 34 call options and traders were paying around $0.45. Najarian decided to...
Market Intelligence Center  Mar 30  Comment 
CSX Corp (CSX) presents a trading opportunity that offers a 8.63% return in just 144 days. A covered call on CSX at the $35.00 level expiring on Aug. '15 offers an assigned return rate of 8.63% or 21.87% annualized. This trade offers 2.95%...
Forbes  Mar 23  Comment 
The worst performing sector as of midday Monday is the Industrial sector, not showing much of a gain. Within that group, Kansas City Southern (NYSE: KSU) and CSX Corp. (NYSE: CSX) are two of the day's laggards, showing a loss of 7.4% and 3.4%,...
TheStreet.com  Mar 23  Comment 
NEW YORK (TheStreet) -- Shares of CSX Corp. were falling 3.8% to $33.83 Monday after competitor railroad company Kansas City Southern lowered its full year 2015 revenue guidance. Kansas City Southern said it now expects low single-digit...
Jutia Group  Mar 18  Comment 
[PR Newswire] - JACKSONVILLE, Fla., March 18, 2015 /PRNewswire/ -- CSX today announced that the I-26 Mega Site in Newberry County, S.C. has been designated a CSX Select Site. "The unified support for seeing this site readied for development is...
Market Intelligence Center  Mar 18  Comment 
MarketIntelligenceCenter.com's patented algorithms have identified an attractive covered-call trade on CSX Corp (CSX). Look at the May. '15 $35.00 covered call for a net debit in the $33.60 area. This trade has a duration of 58 days. The...
SeekingAlpha  Mar 12  Comment 
Insurance Journal  Mar 9  Comment 
Federal regulators say CSX Transportation has agreed to a long-term plan for cleaning up and restoring the area around a fiery oil-train derailment in southern West Virginia. Under the U.S. Environmental Protection Agency order released Friday,...
TheStreet.com  Mar 6  Comment 
NEW YORK (TheStreet) -- CSX , Kansas City Southern , Norfolk Southern and Union Pacific are the railroad components of the iShares Transportation Average Exchange-Traded Fund, and all four have been a recent drag on the...




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CSX Corporation (NYSE:CSX) is one of the nation's leading transportation companies. CSX's 30,000 employees operate a rail network comprised of more than 21,000 miles of track, 4,100 locomotives, 216,000 freight cars, and nearly 33,000 intermodal units.[1] The company transports everything from chemicals to automotive parts. Its main divisions are Merchandise, coal , Intermodal (a combination of rail and truck transportation), and Automotive. The company earned $9 billion in revenue and $1.1 billion in net income in 2009.[2]

Like its counterparts in the railroad industry, CSX is subject to economic cycles. When the economy is doing well, more goods tend to be shipped, and when the economy is doing poorly, fewer goods tend to be shipped. Moreover, the volume of goods being shipped by a particular industry tends to vary directly in proportion to the health of that industry. For instance as housing markets have declined, the demand for the transportation of housing related goods has also decreased. As the price for a barrel of crude oil rises, diesel fuel and trucking becomes much more expensive. Rail prices are much less sensitive to fuel costs, and a massive movement to rail-based transport developed. Volume has exploded the last two quarters for this sector.

Although CSX has made progress in some areas, it still lags its competitors in key performance areas such as train speeds, on-time arrivals and departures, accidents, and re-crews. This is largely due to the complexity of CSX's rail road system. The company's current incarnation is the result of a merger of two separate railroads. CSX also acquired a significant interest in Conrail in 1997; the integration of these three networks results in more operational difficulties than its competitors. As a result of these operational lags to its competitors, hedge funds TCI and 3g Partners acquired large stakes in the company and launched a proxy battle to secure seats on the board of directors.


Business Growth

FY 2009 (ended December 25, 2009)[2]

  • Net revenue fell 20% to $9 billion due to declines in volume and lower fuel surcharge revenue which more than offset core pricing gains.
  • Net income fell 24% to $1.1 billion.

Trends and Forces

Fuel

As with all transportation industries, the price of oil and other fuels have a tremendous impact on CSX's bottom line. A decrease in fuel hedge benefits, coupled with higher diesel prices directly increase CSX's expenses. According to CSX, approximately 85% of its revenue is subject to fuel surcharges or price increases.

Derailments & Accidents

Derailments are a common expense for railroads but the magnitude of the accident can have a significant impact. In addition, because railroads are required by law to transport hazardous materials, there is a possibility of future derailments of this magnitude.

Legislation & Regulation

Railroads are subject to various regulations from multiple government departments, all of which could significantly impact business should they choose to change any of the current regulations. Railroads, and the domestic transportation infrastructure in general, are vulnerable to terrorist attacks and as such, federal, state, and local governments are adopting legislation that will strengthen security. In conforming to new regulations, CSX would undoubtedly incur extensive expenses.[3]

Network Difficulties

CSX is the product of a merger of two separate railroads and has also acquired a 42% economic interest in Conrail. Ensuring the compatibility of these three networks is a difficult task and a constant hindrance to improving train speeds and other operating metrics. The network is also subject to natural disasters, such as Hurricane Katrina, which resulted in more than $170 million in insurance claims. CSX currently spends an average 13%-14% of annual revenue on capital projects, primarily on track maintenance as opposed to expansion.

Unions

Most of the 30,000 employees belong to labor unions, making CSX's relationship with the unions of utmost importance. The rail industry has been fortunate in the past, almost always reaching an agreement during negotiations before a strike becomes necessary. In the last thirty years, there were only six days of work stoppage due to labor negotiations.[4]

Competition

Like other rail lines, CSX directly competes with the trucking and shipping industries. Trains are three times more fuel-efficient than their trucking competitors, but have less short-haul flexibility. As shipping imports from Asia continue to increase, analysts expect increased volume at many East Coast ports because West Coast ports already experience heavy congestion. Higher volumes flowing through the Suez and Panama canals also seem to support this assumption. In the rail industry, CSX's main competitor is Norfolk Southern (NSC), another East Coast rail line. CSX maintains a larger rail network, but Norfolk Southern consistently tops CSX in two of the three the main operating metrics: Train speed and average dwell time (the average time a car resides at the specified terminal location); CSX consistently has more cars online. Norfolk Southern also has a significantly better operating ratio (operating expenses / operating revenue) than CSX - 72.8% vs. 77.8%.

References

  1. CSX 2009 10-K "CSX Rail Network" pg. 18-21
  2. 2.0 2.1 CSX 2009 10-K "Selected Financial Data" pg. 27
  3. CSX 2009 10-K pg. 11
  4. CSX 2009 10-K pg. 12
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