(The following story by Mark Basch appeared on the Florida Times-Union website on January 25, 2010.)
JACKSONVILLE, Fla. — Although CSX Corp.’s (NYSE: CSX) stock dropped sharply last week after its disappointing fourth-quarter earnings report, analysts generally maintained their good long-term outlook for the Jacksonville-based railroad company.
CSX’s stock fell $5.15 to $45.36 over the two days following its late Tuesday report that earnings per share for the quarter – excluding a one-time tax benefit – were 73 cents a share, three cents lower than the consensus forecast of analysts surveyed by Thomson Financial. The stock’s 6.3 percent drop on Wednesday was the biggest fall of all companies in the Standard & Poor’s 500.
But there is light at the end of the tunnel for stockholders.
“We expect some pressure on CSX in light of the downside in continuing fourth-quarter EPS versus the consensus, but the broader positive pricing and EPS story for CSX has not changed in our view. We continue to believe attractive upside remains for the stock in the medium term,” said a note by J.P. Morgan analyst Thomas Wadewitz, who has an “overweight” rating on the stock.
Seventeen analysts rate the stock at “buy” (overweight is the equivalent of buy) or “strong buy,” according to Thomson, and the other nine analysts following the company rate it as hold.
Deutsche Bank analyst Justin Yagerman continues to rate CSX at “buy” but lowered his target price for the stock from $64 to $58 after the earnings report.
“We reiterate our buy rating as we see a solid long-term outlook for the rails given pricing power and our carload outlook,” Yagerman said in a research note.
But a big concern for analysts is a weak demand for coal, which accounts for about 30 percent of CSX’s freight business.
“Coal is expected to constrain near-term earnings, and similar news from other Class I [railroads] this week may continue to pressure shares near-term,” Yagerman said.