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Does CSX Stock Have Further Upside in 2018?

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Aug. 23 2018, Updated 11:05 a.m. ET

CSX’s stock price and returns

CSX (CSX) stock was the shining star among the major railroad stocks last year. The company’s stock has maintained its upward momentum this year as well. The railroad has returned 31.6% year-to-date as of August 21. Last year, CSX stock returned 48.5%. On August 21, CSX stock closed on $74.69, slightly lower than its 52-week high of $75.14. The stock’s 52-week lowest price is $48.12.

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Peer group’s returns

US industrial production growth has seen steady northward momentum in 2018, which boosted the overall freight volumes for US railroads. Higher shipments along with pricing gains boosted their top-line expansion and spurred the earnings growth in 2018.

Plus, the stock buyback initiatives undertaken by major US railroads aided the higher earnings per share in 2018, which made the railroad stocks more lucrative driving the stock rally this year. Operational turnaround measures undertaken by CSX resulted in an expansion in its operating margin. Huge market expectations drove the stock higher in 2018. The railroad’s year-to-date returns as of August 21 have been the highest among its peer group. The company’s peers have given the following YTD returns:

  • Norfolk Southern (NSC): 19.4%
  • Union Pacific (UNP): 11%
  • Kansas City Southern (KSU): 9.3%
  • Canadian Pacific Railway (CP): 12.6%
  • Canadian National Railway (CNI): 7.2%
  • Genesee & Wyoming (GWR): 10%

Investors that are bullish on transportation and logistics stocks can consider investing in the SPDR S&P Transportation ETF (XTN). This ETF has 11.86% exposure to US railroad companies and 22% exposure to US trucking companies.

CSX stock upside

CSX stock has been hovering near its all-time high. The rally in the stock suggests that the market’s expectations have been fully priced into the company’s stock price. The railroad’s year-over-year margin expansion in the first two quarters met analyst and investor expectations. Now, all eyes are focused on the railroad’s freight volume growth, which has remained subdued in 2018. If CSX manages to grow its shipments above the industry average, the stock may rally further this year.

In the next part, we’ll go through the operational changes CSX has implemented.

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