Citi has adjusted its price target for CSX Corporation (NASDAQ: NASDAQ:CSX), a leading transportation company, reducing it to $41 from the previous $42, while retaining a Buy rating on the stock.
The adjustment follows CSX's third-quarter earnings report, which revealed earnings per share (EPS) of $0.46, an 11% increase year-over-year but below the $0.48 anticipated by both Citi and consensus estimates.
The company's management expressed confidence regarding network performance, employee relations, and volume growth opportunities.
However, they provided a cautious fourth-quarter outlook, influenced by the impacts of hurricanes Milton and Helene on its core operating regions. Despite earlier expectations for low-single-digit revenue growth in the second half of 2024, CSX now foresees a moderate revenue decline in the fourth quarter, including a $200 million headwind due to lower fuel prices and coal.
The third quarter of 2024 showed a modest year-over-year revenue growth of 1.3%, but this was coupled with decreases in Intermodal and Coal revenue per unit (RPU) by 4.5% and 5.4%, respectively. This performance has led to some concerns about future earnings and market perception.
In other recent news, CSX Corp. disclosed its third-quarter results, which fell short of analyst expectations. Despite a growth in volume and operating income, the railroad operator's earnings and revenue did not meet the projected figures.
CSX reported adjusted earnings per share of $0.46, missing the analyst consensus of $0.48, and revenue was $3.62 billion, below estimates of $3.68 billion. However, there was a 1% YoY increase in revenue and a 3% rise in total volume compared to the same quarter last year.
Operating income grew 7% to $1.35 billion, and the operating margin expanded 180 basis points to 37.4%. Net earnings also saw a bump, growing to $894 million from $828 million in the previous year's period. CSX experienced growth in merchandise and intermodal volumes, along with pricing gains in merchandise, but this was partially offset by lower coal revenue due to declining global benchmark prices and reduced fuel surcharges.
CEO Joe Hinrichs attributed the growth in volume, operating income, and operating margin to CSX's commitment to excellent service. Despite facing "significant challenges" from recent hurricanes, CSX maintained network flexibility and resilience, thanks to the dedication of its employees.
InvestingPro Insights
CSX Corporation's financial metrics and market position offer additional context to Citi's recent price target adjustment. According to InvestingPro data, CSX maintains a robust market capitalization of $68.77 billion, reflecting its significant presence in the Ground Transportation industry. The company's P/E ratio of 19.45 suggests a moderate valuation relative to earnings, which aligns with Citi's cautious outlook for the fourth quarter.
Despite the challenges highlighted in the article, CSX demonstrates financial strength in several areas. An InvestingPro Tip notes that CSX has impressive gross profit margins, which is supported by the data showing a gross profit margin of 48.41% for the last twelve months as of Q2 2024. This strong profitability metric underscores the company's operational efficiency, even in the face of recent headwinds.
Another InvestingPro Tip worth noting is that CSX has raised its dividend for 20 consecutive years, indicating a commitment to shareholder returns. This is particularly relevant given the article's mention of potential concerns about future earnings. The company's dividend yield stands at 1.35%, with a dividend growth rate of 9.09% over the last twelve months, showcasing CSX's ability to maintain and grow shareholder distributions despite market challenges.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips on CSX, providing deeper insights into the company's financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.