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Why Investors Should Hold CSX Corporation (CSX) Stock Now

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CSX Corporation (CSX - Free Report) is benefiting from rising export of coal volumes and solid investor-friendly measures. However, supply-chain disruptions are headwinds.

Factors Favoring CSX

CSX’s top line is benefiting from higher export coal volumes, domestic intermodal shipments, volume growth in other segments and pricing gains. Evidently, coal revenues increased 36% in 2022 driven by strength in export coal. High export coal prices and fuel surcharge revenues are expected to bolster the top line in the near term.

CSX’s commitment to reward its shareholders is encouraging. In February 2023 the company announced a 10% hike in its quarterly dividend to 11cents per share. In 2022, CSX rewarded shareholders roughly $5,583 million through buybacks ($4,731 million) and dividends ($852 million). In 2021, the company returned more than $3.7 billion to shareholders through buybacks ($2.9 billion) and dividends (over $800 million).

Key Risk

CSX’s operations are being hurt by supply-chain disturbances, including labor and equipment shortages. Weakness in Merchandise due to semiconductor shortage is concerning. Revenues from Intermodal (internationally) are expected to be affected at least in the near-term due to headwinds like inflationary pressures.  

Zacks Rank & Key Picks

CSX currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Zacks Transportation sector are American Airlines (AAL - Free Report) and Copa Holdings, S.A. (CPA - Free Report) .

American Airlines, currently carries a Zacks Rank #2 (Buy), is benefiting from the improved air-travel-demand situation. In the fourth quarter of 2022, AAL reported earnings of $1.17 per share, surpassing the Zacks Consensus Estimate by 2.63%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

For first-quarter and full-year 2023, AAL’s earnings are expected to register 101.3% and 396% growth, respectively, on a year-over-year basis.

Copa Holdings sports a Zacks Rank #1 at present.  We are encouraged by CPA's focus on its cargo segment.

For first-quarter and full-year 2023, CPA’s earnings are expected to register 324.3% and 42.5% growth, respectively, on a year-over-year basis.
 


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