NEW YORK (TheStreet) -- Shares of CSX Corp. (CSX) are down 3.48% to $35.22 amid market concerns surrounding the shale by rail risk following OPEC's decision to sustain its production at 30 million barrels per day, Goldman Sachs analysts said.
The rail-based transportation services company is part of the group affected by OPEC's announcement on November 27 that seems to have triggered a sell-off in Class I rail stocks on the following day, with the sector pulling back 5% on average, analysts said.
"Crude by rail represents only about 3% of industry volumes. However, the shale value chain is more meaningful when taking into consideration shipments of frac sand, pipes and equipment" analysts noted.
"Petroleum and related products coupled with aggregates (a frac sand proxy) represent an estimated 5% of total Class I rail carloads. Moreover, combined, these two commodities comprise 20% of the incremental carload growth year to date," analysts added.
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, revenue growth, reasonable valuation levels and expanding profit margins. We feel these strengths outweigh the fact that the company shows weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 39.83% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, CSX should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- CSX CORP has improved earnings per share by 13.3% 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 two years. We feel that this trend should continue. During the past fiscal year, CSX CORP increased its bottom line by earning $1.83 versus $1.79 in the prior year. This year, the market expects an improvement in earnings ($1.91 versus $1.83).
- Despite its growing revenue, the company underperformed as compared with the industry average of 10.4%. Since the same quarter one year prior, revenues slightly increased by 7.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- 39.34% 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 15.80% trails the industry average.
- You can view the full analysis from the report here: CSX Ratings Report