(The following column by Mark Basch appeared on the Florida Times-Union website on September 27, 2010.)
JACKSONVILLE, Fla. — Long-time CSX Corp. shareholders should feel pretty good about their investment these days.
A Bloomberg News story last week touted Jacksonville-based CSX as one of the top performing stocks in the Standard & Poor’s 500 over the past decade, with an annual return (including dividends) of 18.6 percent.
The Bloomberg story’s main focus was the poor performance of financial stocks over the past decade while executives of those companies continue to receive huge bonuses. It said Goldman Sachs Group Inc. has been the best performing financial company since September 2000 with a mere 2.78 percent annual return, with most of those stocks losing value. The 80 stocks in the S&P 500 Financials Index have collectively produced a 49 percent loss over the past 10 years, it said, pointing out that investors would have been better off buying shares of industrial companies such as CSX.
Transportation stocks in general seem to be a good investment. The only two Jacksonville-based companies with better returns than railroad company CSX in the past decade are trucking company Landstar System Inc., with an annual return of 21.3 percent, and trucking and real estate company Patriot Transportation Holding Inc. at 16.7 percent. Neither of those companies is in the S&P 500.
At least one analyst thinks CSX’s stock will continue to rise. BMO Capital Markets analyst Fadi Chamoun last week initiated coverage of CSX with an “outperform” rating and set a $72 price target for the stock, which has been trading in the mid-$50s recently.
“CSX has been on a steady march of productivity improvement and pricing growth since early 2005, which earns the company the title of the most improved major Class 1 railroad (and best-performing railroad stock) in North America,” Chamoun wrote in his report.
He also expects CSX to become the industry leader in return on equity by the end of the year and said “we expect net income conversion into free cash flow to further improve in coming years, supporting further distribution to shareholders.”