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Where Analysts Are Leaning on CSX Today

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Jan. 19 2018, Updated 10:33 a.m. ET

Analyst recommendations for CSX

CSX (CSX) is covered by 26 analysts. Since its 4Q17 results, the stock has seen two analyst recommendation changes. Previously, there had been 11 analysts with a “buy” opinion on the stock, but now the number is ten.

Before its 4Q17 earnings results, CSX had seven analysts advising a “hold.” Now, after the results, there are eight analysts advising stock owners to “hold” the company’s stock. The number of analysts with a “strong buy” opinion has remained same before and after the 4Q17 earnings release, with six analysts recommending a “strong buy.”

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Peer group ratings

In CSX’s peer group, Norfolk Southern (NSC) has a consensus rating of 2.65, indicating a “hold” opinion on the stock. Major Western US rail carrier Union Pacific (UNP) has a mean rating of 2.32. reflecting a “buy.”

By comparison, the smallest class-I railroad in the US, Kansas City Southern (KSU), has a consensus rating of 2.44, denoting a “buy” recommendations among the analysts surveyed by Thomson Reuters. Genesee & Wyoming (GWR), the largest short-line operator in the US, has a mean rating of 1.92 and a consensus “buy” recommendation.

Among the Canadian railroads, Canadian National Railway (CNI) has a consensus rating of 2.6 and a consensus “hold” recommendation. Its prime competitor, Canadian Pacific Railway, has a mean rating of 2.12, indicating a “buy.”

Inside the analysts’ overall recommendation

CSX has the lowest free cash flow metric among all class-I railroads in the US. Aided by recent US tax reform benefits and a ~$665.0-million reduction in capital expenditure, CSX generated $1.7 billion in free cash flow (before dividends and after adjusting for the restructuring charges) in 2017.

This should help CSX lower its debt levels and increase its stock buybacks, and the gross effect could be a strong upsurge in the company’s EPS (earnings per share) going forward.

In the meantime, CSX remains just like other class-I railroads (IYJ), which have volume growth concerns. But these worries are far bigger for CSX, as it has faced a lot of customer dissatisfaction recently. For this reason, winning back client trust and returning to its network remain the biggest challenges for CSX going forward.

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