(The following article by Kate DuBose Tomassi was posted on Forbes.com on March 27.)
NEW YORK — With its turnaround plan on target, Merrill Lynch research analyst Ken Hoexter reiterated a “buy” rating and $70 price objective on CSX Corp.
“We believe the company’s operational turnaround is benefiting CSX’s operations to a greater extent than we anticipated, as is evident by the consistent improvement in its velocity measures,” the analyst said in a report Monday.
The analyst raised his first-quarter earnings estimate to 91 cents from 86 cents per share. He also raised his 2006 and 2007 estimates to earnings of $3.90 and $4.70 per share, respectively, from $3.85 and $4.65.
CSX’s productivity is improving due to its One Plan refinement, said Hoexter. In addition, he noted that the company has rebounded from the impact of Hurricane Katrina.
The analyst predicted that CSX will see yield-growth near double digits for the first quarter, in-line with recent performance in the rail group and Union Pacific’s pre-announcement. He raised the yield-growth target to 9.9% from his previous target of 8.7%, down slightly from a 11.4% increase in the last quarter, but in-line with the full-year 2005 growth rate.
CSX will report first-quarter 2006 earnings on April 19.