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CSX – Market expectations are record-high Uniform ROA, but management may have concerns about their operating ratio, efficiency, and demand

February 12, 2021

  • CSX Corporation (CSX:USA) currently trades near historical highs relative to UAFRS-based (Uniform) earnings, with a 22.4x Uniform P/E. At these levels, the market is pricing in bullish expectations for the firm, but management may have concerns about their operating ratio, network efficiency, and the sustainability of demand
  • Specifically, management may lack confidence in their ability to sustain operating ratio improvements and drive revenue growth, and they be overstating the strength of their business demand and volume growth from East Coast ports. Furthermore, management may lack confidence in their ability to make their network more efficient, execute their fleet and scheduling improvement plans, and optimize train dwell and velocity. Moreover, they may be exaggerating the strength of their cash position and the potential of their technology and locomotive rebuild investments, and they may have concerns about the pace of coal price recovery