Jacksonville, FL-based CSX Corporation (NYSE:CSX) has been performing very well this year.
CSX is benefiting from an improvement in the coal-related scenario, which has been aiding overall volume growth. In fact, volume growth is expected in the second quarter as well.
Moreover, the company’s efforts to boost its bottom line by controlling costs are impressive. In particular, CSX’s CEO, E. Hunter Harrison, who joined the company a few months back, intends to drive growth at CSX by slashing costs.
Harrison was earlier working at Canadian Pacific Railway Limited (USA) (NYSE:CP).
We are also impressed by the 11% dividend hike announced by CSX Corp earlier this year in its quarterly dividend payout. Following the announcement, the new quarterly dividend is 20 cents per share. It is to be noted that the company’s dividend has been increased 13 times, since 2005.
In another shareholder friendly move, CSX’s Board cleared a new $1 billion share buyback program. Management expects to complete the new program by Mar 31, 2018.
Shares of this Zacks Rank #2 (Buy) company have gained 46.4% on a year-to-date basis, outperforming the Zacks categorized Transportation-Rail industry’s rally of 15.3%.
Notably, CSX has an impressive track record with respect to earnings per share having outperformed the bottom line in five of the last seven quarters.
In fact, in the recently reported quarter (first quarter of 2017) the railroad operator performed very impressively, outperforming not only with respect to earnings but also revenues.
CSX Earnings Estimates on an Upswing
The optimism surrounding the stock can be gauged from the fact that the Zacks Consensus Estimate for 2017 has moved north by 11.2% to $2.29 per share over the last 90 days, on the back of multiple upward revisions.
In fact, earnings per share for the current year are projected to grow at a healthy 26.7%, over 2016 levels.
Additionally, the Zacks Consensus Estimate for 2018 has jumped 16.5% to $2.75 per share in the last three months.
CSX Valuation & Style Score
On a price-to-book basis, shares are trading at 4.1x, which is less than the industry average of 4.6x. Also, on a price-to-sales basis, shares are trading at 4.3x, a discount to the industry average of 4.9x. In fact, going by the EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation and amortization) ratio, the stock does not look too expensive at this point.
CSX stock currently has a trailing 12-month EV/EBITDA ratio of 12.82, which again compares favorably to the industry value.
Additionally, the stock has an attractive VGM Score of ‘B’. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores.
Taking into account the above-mentioned tailwinds and the favorable readings, we believe that the current price represents an attractive entry point for investors. Furthermore, the railroad’s bullish Zacks Rank supports our view.
Other Railroad Stocks to Consider
Investors interested in the railroad space may also consider Union Pacific Corporation (NYSE:UNP) and Alstom SA (OTCMKTS:ALSMY) carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Union Pacific’s 2017 Zacks Consensus Estimate for earnings has climbed 2% to $5.7 per share in the last two months.
Alstom’s Zacks Consensus Estimate for earnings in the current year is projected to grow 54.55%.
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