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CSX’s Intermodal Division’s 5-Year Growth Supports Stock Prices

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Growth in Intermodal division

CSX’s (CSX) Intermodal division competes and provides an alternative to transporting freight on the highways using trucks. The division grew at a CAGR (compound annual growth rate) of 8.5% over the past five years and forms approximately 14% of the company’s total revenues. However, its revenue in 1Q15 declined by 1%, mainly due to lower international volume partially offset by good growth on the domestic front.

CSX’s domestic volume increased by 9%, mainly driven by continued success with CSX’s highway-to-rail (or H2R) conversion program, growth with existing customers, and new service offerings. However, its international volume declined 7%, primarily as a result of US West Coast port disruptions that impacted global container shipments moving to inland destinations.

Fastest growing division

CSX is building new terminals and increasing its network capacity to broaden its market presence in key growth areas. CSX started its Northwest Ohio Intermodal terminal operations in 2011, which it expanded further in 2014. The expansion enables service offerings to customers, reduces interchanges in Chicago, improves market access to and from East Coast ports, and enhances the network’s fluidity.

The company is planning to start construction on a new terminal near Pittsburgh, Pennsylvania, in the current financial year. This will enhance its intermodal reach and support future growth.

CSX faces competition from transport providers like Union Pacific (UNP), Norfolk Southern (NSC), Kansas City Southern (KSU), Genesee & Wyoming (GWR), Berkshire Hathaway (BRK-B), Canadian Pacific Railway Limited (CP), and Canadian National Railway (CNI). Together, these companies form 9.30% of the Industrial Select Sector SPDR Fund (XLI).

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