NEW YORK (TheStreet) -- Shares of CSX (CSX) - Get CSX Corporation Report closed up 2.94% to $34.97 on Thursday due to merger speculation with Canadian Pacific Railway (CP) - Get Canadian Pacific Railway Limited Report, and due to an increase in inter-modal cargo, Bloomberg reports.
Last October, Canadian Pacific Railway said it ended merger talks with CSX, however, speculation has continued since then, The Wall Street Journal reports.
Another factor why the stock moved higher today is the 9.4% increase in inter-modal cargo, which was reported in the weekly traffic updates by the Association of American Railroads.
However, "the bigger weight is around the speculation of the merger," Cowen & Co. analyst Matt Elkott told Bloomberg. Once CP's CEO Hunter Harrison brought up the merger attempt, "it wasn't going to go away," Elkott said.
Separately, TheStreet Ratings team rates CSX CORP as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate CSX CORP (CSX) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, growth in earnings per share, increase in net income, revenue growth and expanding profit margins. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- CSX CORP has improved earnings per share by 12.5% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, CSX CORP increased its bottom line by earning $1.93 versus $1.83 in the prior year. This year, the market expects an improvement in earnings ($2.04 versus $1.93).
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Road & Rail industry average. The net income increased by 11.1% when compared to the same quarter one year prior, going from $398.00 million to $442.00 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 0.7%. Since the same quarter one year prior, revenues slightly increased by 0.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- 37.59% is the gross profit margin for CSX CORP which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 14.60% trails the industry average.
- You can view the full analysis from the report here: CSX Ratings Report