TSC Ratings' Updates: Research In Motion

We've downgraded CSX Corp. (CSX Quote), which provides rail-based transportation services in North America, from buy to hold. The primary factors that have impacted our rating are mixed. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income and poor profit margins.

Despite its growing revenue, the company underperformed as compared with the industry average of 21.6%. Since the same quarter one year prior, revenues rose by 18.4%. Growth in the company's revenue appears to have helped boost the earnings per share.

The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Road & Rail industry and the overall market, CSX's return on equity exceeds that of both the industry average and the S&P 500.

Net operating cash flow has increased to $848.00 million or 14.13% when compared to the same quarter last year. Despite an increase in cash flow, CSX's cash flow growth rate is still lower than the industry average growth rate of 62.89%.

The gross profit margin for CSX is currently lower than what is desirable, coming in at 32.40%. Regardless of CSX's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 12.90% trails the industry average.

The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed compared to the Road & Rail industry average, but is greater than that of the S&P 500. The net income has decreased by 6.1% when compared to the same quarter one year ago, dropping from $407.00 million to $382.00 million.