CSX Delivers A Better-Than-Expected Q3 With Improved Top Line

Citi remains Buy-rated on CSX Corporation (NASDAQ: CSX) following the transportation company’s better-than-expected quarterly results, driven by better yields and lower costs.

The third-quarter EPS fell 8 percent to $0.48, but $0.03 above Citi estimate. Revenues were down 8 percent, but $55 million above Citi’s target.

Although cost performance was solid (about $340 million year-to-date efficiency and $200 million right sizing savings), the real outperformance came from positive mix. Citi said CSX may increase its target to about $400 million.

“To be clear, our positive outlook for the rails has been underpinned by a view of improving commodity mix heading into 2017 and CSX’s results are a good leading indicator for the thesis,” analyst Christian Wetherbee wrote in a note.

Related Link: From CSX Q3 Earnings Conference Call: Sees Q4 EPS Flat To Down "Slightly"

Wetherbee also raised his fourth-quarter EPS estimate to $0.46 from $0.44, 2016 view to $1.77 from $1.72 and 2017 estimate to $2.01 from $1.95. 

“Given the progress CSX has made in 2016 on the cost side, we believe the introduction of volume growth in 2017 (even if modest) is likely to result in solid incremental margins and therefore drives EPS higher,” Wetherbee continued.

The analyst also raised his price target by $2 to $34, with potential return of 12.5 percent.

Shares of CSX closed Wednesday’s trading at $30.21 and were up 1.69 percent at $30.72 at last check Thursday mid-morning.

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