Investors should note that after its 1Q17 results, analysts’ opinions on CSX (CSX) haven’t changed. CSX has a mean analyst rating of ~2.2, indicating a “buy.” Of the 29 analysts covering CSX, seven have issued a “strong buy,” 11 advise a “buy,” and ten analysts suggest a “hold” on the stock. Only one analyst issued a “sell” opinion on CSX stock.
Analysts’ price target
Although Wall Street analysts haven’t changed their ratings on CSX stock, the 12-month price target has been revised. Before CSX’s 1Q17 earnings, the 12-month price target was $52.00, which was revised to $54.00. This represents a return potential of 9% over the next 12 months. Recently, CSX stock has been very close to its 52-week high of $51.00.
Peer group target price
Among CSX’s closest peers, its rival Norfolk Southern (NSC) has a price target of $121.80. This translates to a return potential of 8.1%. Canada’s largest freight railway, Canadian National (CNI), has a price target of 97.10 Canadian dollars, with a 12-month return potential of -3.3%. A non-Class I US railroad, Genesee & Wyoming (GWR) has a target price of $79.10 with a return potential of 18%.
All major US railroads are part of the portfolio holdings of the WisdomTree Earnings 500 ETF (EPS).
Why a “buy” on CSX?
According to CSX’s CFO, Frank Lonegro, “In 2017 CSX expects to achieve a mid-60s operating ratio, record efficiency gains…, EPS growth of around 25% off of 2016’s reported EPS of $1.81 and free cash flow before dividends of around $1.5 billion.”
On April 20, 2017, CSX announced an 11%, or $0.02 per share, increase in the quarterly dividend. This was backed by a new one-year $1.0 billion share buyback program. Plus, the company intends to disclose its aggressive overhaul plan in the second half of 2017.
Analysts have factored in CSX’s rise in volume along with the cost-cutting initiatives of its new CEO, Hunter Harrison. With the turnaround in operating margins at Canadian Pacific, markets are expecting Harrison to recreate the CP magic at CSX.