CSX (CSX) Showing Signs Of Being A Roof Leaker

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer.

Trade-Ideas LLC identified CSX ( CSX) as a "roof leaker" (crossing below the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified CSX as such a stock due to the following factors:

  • CSX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $261.2 million.
  • CSX has traded 1.7 million shares today.
  • CSX is trading at 1.71 times the normal volume for the stock at this time of day.
  • CSX crossed below its 200-day simple moving average.

'Roof Leaker' stocks are worth watching because trading stocks that begin to experience a breakdown can lead to potentially massive losses. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock may then be subject to emotional selling from investors that can continue to drive the stock lower. Regardless of the impetus behind the price and volume action, when a stock moves with weakness and volume it can indicate the start of a new, potentially dangerous, trend.

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More details on CSX:

CSX Corporation, together with its subsidiaries, provides rail-based transportation services in the United States and Canada. It offers traditional rail services, and transports intermodal containers and trailers. The stock currently has a dividend yield of 2%. CSX has a PE ratio of 19. Currently there are 6 analysts that rate CSX a buy, no analysts rate it a sell, and 12 rate it a hold.

The average volume for CSX has been 9.9 million shares per day over the past 30 days. CSX has a market cap of $34.6 billion and is part of the services sector and transportation industry. The stock has a beta of 1.35 and a short float of 1.2% with 1.59 days to cover. Shares are down 3.8% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates CSX as a buy. 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 ratings report include:
  • 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 0.8%. 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.

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