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Will CSX Manage to Beat Analysts’ Earnings Estimate in 3Q17?

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Oct. 12 2017, Updated 7:39 a.m. ET

Analysts’ 3Q17 earnings estimates

In the last part of this series, we looked at CSX’s (CSX) estimated operating margins for 3Q17. Here, we’ll consider analyst earnings estimates for the company. Reuters-surveyed analysts project adjusted earnings per share (or EPS) of $0.52 for CSX in 3Q17.

On a sequential basis, the adjusted EPS is expected to fall 12% in 3Q17. CSX’s EPS was $1.95 in the last four quarters. Analysts predict the same to be $2.4 in the next four quarters, which would be a 23% rise.

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Will CSX surpass estimates in 3Q17?

Let’s look at the factors that could negatively impact CSX’s net earnings in 3Q17. The company’s interest expenses are anticipated to go up by around 3% to $142.5 million in 3Q17 on a yearly basis. Plus, costs related to restoring the facilities after storm damage will likely also put pressure on its net earnings in 3Q17.

On the positive side, under the Precision Schedule railroading, CSX has taken a slew of measures including reducing train count and minimizing customer transit times. The benefits from the new operational improvement model will likely act as a positive for the company’s net earnings. In addition, the new $1.5 billion share repurchase program announced in 2017 is further expected to bring down the total number of shares outstanding in the quarters to come. This should boost CSX’s per-share earnings going forward.

Peer groups’ estimated 3Q17 EPS

Norfolk Southern (NSC) is expected to report 9% higher earnings per share. The smallest Class I railroad in the US, Kansas City Southern (KSU), is anticipated to report ~19% higher earnings. Analysts project 11% higher earnings for major Western US railroad Union Pacific (UNP) in the third quarter of 2017. They expect the largest short-line operator, Genesee & Wyoming (GWR), to report 12% lower earnings in 3Q17.

If you are interested in exposure to industrial stocks, you can consider investing in the First Trust Industrials/Producer Durables AlphaDEX Fund (FXR). This ETF has a 5.2% holding in all major US railroads.

Recently, CSX declared a quarterly dividend. We’ll look at that in the next part of this series.

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