CSX’s 12-month target price
According to Reuters, analysts have a 12-month consensus price target of $57.5 on CSX. On October 9, 2017, its closing price was $52.8. This means CSX’s stock has a potential return of ~9% over the next one year. In the last 12 months, the company’s stock has doubled.
Peer group target price
CSX’s prime competitor, Norfolk Southern (NSC), has a target price of $127.4 with a return potential of -2.6%. Its peers’ target price and return potentials are as follows:
- Union Pacific (UNP) has a target price of $120.4 with a next-12-month return of 5.7%.
- Kansas City Southern (KSU) has a price target of $113.1 with a return potential of 8.5%.
- Canadian National Railway (CNI) has a price target of $106.3 Canadian dollars with a return potential of 5.3%.
- Canadian Pacific Railway (CP) has a price target of $224.5 Canadian dollars.
- Genesee & Wyoming (GWR) has a price target of $74.6 with a return potential of 3.2%.
Those wanting indirect exposure to transportation stocks can consider the iShares US Industrials ETF (IYJ). This ETF holds 6.1% in US-originated major railroads.
Analysts’ perspective on CSX
Currently, CSX stock seems to be the biggest gamble among the major railroad stocks in the US. Those that are bullish on the company have pinned their hopes on CEO E. Hunter Harrison. CSX has been banking on Harrison’s expertise in the precision schedule railroading (or PCR) model.
On a different note, Hunter Harrison has health concerns evident from his past health record. At times the 72-year-old industry veteran has used a portable oxygen kit while at CSX. His health issues could affect CSX’s implementation of the PCR model. Though Harrison has a four-year contract with the company, his health-related issues can’t be overlooked. Notably, Morgan Stanley (MS) downgraded CSX stock to “underweight” from “equal-weight.”
In addition, the recent hurricanes seem to have halted the company’s PCR implementation rate. Plus, the disruptions caused due to shifting to the new model have irked several CSX customers. In September 2017, the company’s Ohio yard had a snag that forced the rerouting of its automotive freight. Importantly, this has the potential to negatively impact its top line in the coming quarters.
In the final part, we’ll see how CSX looks compared to peers in terms of valuation.