It's been a solid year for railroad operator CSX (CSX); in the last 12 months, shares have rallied approximately 37%. While rail travel may not be commonplace for most Americans, it's still an exceptionally popular mode for freight, particularly commodities. For CSX, the cash crop is coal; the firm generated almost a third of its revenue shipping coal products last year.
Scale matters in the rail business, where shipping abilities are predicated on network size. CSX weighs in as one of the largest railroad operators in the world, with more than 21,000 miles of track concentrated in the eastern U.S. That means that the firm has a big economic moat, with a network that's effectively impossible to replicate today. In the last five years, CSX has improved its efficiency by leaps and bounds, wringing bigger margins out of every train car that it pulls across its tracks. In a world with prolonged high oil prices, rail travel should continue to be a winning bet.After all, while trucking (the biggest alternative to rail freight) is generally a more simple solution for a distribution chain, it's also more expensive -- generally four times more expensive than train shipping per ton. As cost inflation starts to work its way into this recovery, expect to see an uptick in shipment volumes at CSX.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV