Will CSX Stock be Affected by Louisville & Indiana Railroad Agreement?

NEW YORK (TheStreet) -- CSX Corp. (CSX) announced the completion of an agreement that grants it a permanent easement to operate over Louisville & Indiana Railroad's 106-mile rail corridor between Indianapolis and Louisville.

The transportation company paid $10 million for the permanent easement. The companies also finalized an operating agreement that provides for an additional $90 million in infrastructure upgrades over the next several years to improve the track structure and right of way along the route.

"CSX's investment of approximately $100 million will provide enhanced rail access for the Port of Indiana-Jeffersonville, increase capacity and efficiency along this corridor and improve connectivity to CSX's broader network," CSX President and COO Oscar Munoz said.

Munoz continued, "These critical infrastructure improvements include the installation of new rail, upgrades to the rail bed structure and bridge improvements to enhance safety and service for customers in the Midwest and provide more efficient rail service throughout the region."

Shares of CSX were falling 1.4% to $35.04 this afternoon.

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 the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results."

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

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