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Will Rising Costs be a Dampener for CSX This Earnings Season?

Zacks

CSX Corporation CSX is slated to report third-quarter 2017 earnings results on Oct 17, before the market opens.

Last quarter, the company delivered a positive earnings surprise of 8.5%. The company’s impressive earnings history shows that it has surpassed the Zacks Consensus Estimate in three of the last four quarters with an average beat of 8.4%.

Let’s see, how things shape up this earnings season.

Factors at Play


Back-to-back hurricanes (Harvey and Irma) havedisrupted railroad operations and CSX is not spared the catastrophe either. Also, freight costs have skyrocketed following the natural disasters. With fuel costs on the rise, CSX’s bottom line is likely to be hurt in the third quarter.

Sluggishness of the automotive unit is also a cause for worry in CSX’s case. With the automotive sector accounting for a significant chunk of revenues, softness in automotive volumes is but likely to limit the company’s bottom-line growth in this soon-to-be-reported quarter.

Recently encountered service disruptions by the company also do not bode well for its future and might hamper results in the quarter.

Further adding to its woes, CSX surfaces as a highly leveraged company. The stock has seen the Zacks Consensus Estimate for current-quarter earnings being revised 11.9% downward over the last 90 days and this in turn reflects the stock’s surrounding negative sentiment.

Due to these headwinds, shares of the company have underperformed its industry in the last three months. The stock has declined 2.7% against the industry’s 0.6% gain.

However, improvement in coal volumes holds promise for CSX in the soon-to-be-reported quarter. The Zacks Consensus Estimate for third-quarter coal revenues stands at $530 million. The intermodal segment is also expected to perform well in the third quarter of 2017. The Zacks Consensus Estimate for third-quarter intermodal revenues stands at $451 million.

Earnings Whispers

Our proven model does not conclusively show that CSX is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. However, that is not the case here as elaborated below.

Zacks ESP: The Earnings ESP for CSX is -1.33%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: CSX carries a Zacks Rank #3, which increases the predictive power of ESP. However, the company’s negative ESP leaves surprise prediction inconclusive.

We caution against all Sell-rated stocks (#4 or 5) going into an earnings announcement.

CSX Corporation Price and EPS Surprise

CSX Corporation Price and EPS Surprise | CSX Corporation Quote

Stocks to Consider

Investors interested in the broader Transportation sector may consider a few good stocks like C.H. Robinson Worldwide, Inc. CHRW, Norfolk Southern Corporation NSC and Union Pacific Corporation UNP from the space. Our model highly recommends these as they possess the right combination of elements to beat on earnings in their next releases.

C.H. Robinson has an Earnings ESP of +0.06% with a favorable Zacks Rank #3. The company will report third-quarter 2017 resultson Oct 31.

Norfolk Southern has an Earnings ESP of +0.87% and a Zacks Rank of 3 as well. The company will report third-quarter 2017 figures on Oct 25. You can see the complete list of today’s Zacks #1 Rank stocks here.

Union Pacific is also #3 Ranked with an Earnings ESP of +0.05%. The company will release third-quarter 2017 earnings numbers on Oct 26.

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