NEW YORK (TheStreet) -- Before the interstate system revolutionized how major cities and states were connected, the backbone of commerce was railroads. Times have changed, but that hasn't changed the value of CSX (CSX), the biggest railroad operator in the eastern U.S.
Declining coal demand caused by a shift to cheaper natural gas is still a challenge to CSX's business, but the company has emerged through the worst periods of weak volume with margins that have begun to expand. This makes CSX, which competes with industry leader Union Pacific (UNP), a name to watch.
So ahead of the company's first-quarter earnings results Tuesday, now's the time to buy, especially with shares down 7% on the year. And at 17 times earnings, compared with an average price to earnings ratio of 21 for stocks in the S&P 500 (SPX) index, CSX shares look like a tremendous bargain. Shares, at $33, are down nearly 9% for the year to date but are up 18% for the past 52 weeks.
Headquartered in Jacksonville, Fla., CSX's rail network transports products from a diverse range of industries, including chemicals, metals and minerals. But its bread and butter comes from transporting containers from trucks over its tracks, known as "intermodal" shipping. This makes up 40% of its rail volume. Its benefits include lower fuel costs and higher freight density. Also, the company is able to pack more freight per transport adds to the efficiency it can gain per delivery since it minimizes waste.