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Key Reasons Why Hold-Strategy is Apt for the CSX Stock Now

A healthy freight environment bode well for CSX. The company's commitment to reward its shareholders through dividends and share buybacks is encouraging.

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This story originally appeared on Zacks

CSX Corporation CSX is benefiting from a healthy freight environment even as supply chain disruptions hurt its operations. The company also has an impressive track record of consistently rewarding its shareholders.

Thanks to strong freight demand, CSX is seeing growth across all its businesses. In the first nine months of 2021, total revenues increased 17% with 9% rise in volumes. All segments witnessed growth in terms of volumes and revenues. The company hopes to achieve double-digit revenue growth in 2021. Apart from higher volumes, the July 2021 acquisition of Quality Carriers is contributing to the company’s top-line growth.

CSX’s measures to reward its shareholders through dividends and share buybacks are encouraging. In February, the company announced an 8% hike in its quarterly dividend to 28 cents per share.  In the first nine months of 2021, the company returned more than $2.9 billion to shareholders through $2.3 billion in buybacks and over $600 million in dividends.

As coronavirus-related uncertainty continues, CSX’s sound liquidity position is expected to provide a cushion against potential adversities. The company’s cash and cash equivalents stood at $2,179 million at the end of the third quarter of 2021, much higher than the current debt of $211 million, implying that the company has sufficient cash to meet its current debt obligations. Its current ratio at the end of the same period was 1.72, which is usually considered good, as it implies that the company is capable of repaying its current obligations.

Owing to the above-mentioned tailwinds, shares of CSX have gained 25.4% in a year’s time, outperforming the industry’s 20.1% increase.

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Zacks Investment ResearchImage Source: Zacks Investment Research



The Zacks Consensus Estimate for CSX’s 2022 earnings has been revised upward by 5.4% in the past 90 days.

In view of the above positives, we believe investors should hold on to the CSX stock for now, as is suggested by its Zacks Rank #3 (Hold).

Key Picks

Here are some better-ranked stocks within the broader Transportation sector:

ArcBest Corporation ARCB flaunts a Zacks Rank #1 (Strong Buy). The company has a stellar earnings surprise history. It has outperformed the Zacks Consensus Estimate for earnings in each of the preceding four quarters, the average surprise being 27.4%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of ArcBest have surged more than 100% in a year’s time.

Expeditors International of Washington EXPD carries a Zacks Rank #1. The company’s earnings have outperformed the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 29.1%.

Shares of Expeditors have appreciated more than 42% in a year’s time.

Schneider National SNDR carries a Zacks Rank #2 (Buy). The company’s earnings have trumped the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 21%.

Shares of Schneider National have rallied more than 32% in a year’s time.

 



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CSX Corporation (CSX): Free Stock Analysis Report

 

Expeditors International of Washington, Inc. (EXPD): Free Stock Analysis Report

 

ArcBest Corporation (ARCB): Free Stock Analysis Report

 

Schneider National, Inc. (SNDR): Free Stock Analysis Report

 

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Zacks Investment Research