RBC Capital upgraded CSX Corp. (CSX) to "outperform" Thursday after CSX management provided guidance for only 5% to 10% decline in thermal coal traffic in 2013. The analyst firm sees higher multiples on the shares to a more normalized level going forward. It also raised its price target on CSX from $25 to $27 a share. The railroad also has had other positives recently.
Other recent positives for CSX:
- Earlier in the week, BMO Capital Markets reiterated its "outperform" rating earlier in the week and slightly raised its priced target to $26 a share.
- Company's management also stated they expected $130mm in labor cost savings in 2013.
- CSX also slightly beat on the revenue side during its recent earnings report on Tuesday.
- Finally, the railroad could benefit from the low water levels in the Mississippi river which is diverting barge traffic.
CSX Corporation provides rail-based transportation services. It offers traditional rail service and the transport of intermodal containers and trailers.
4 reasons CSX provides value at $22 a share:
- The company should benefit from strong auto sales, the recovery in the housing & construction markets and an increase in manufacturing activity.
- CSX yields 2.6% and has more than tripled its dividend payout over the past half dozen years.
- The company has beat earnings estimates each of the last four quarters. It also sports a forward P/E of less than 11, a discount to its five year average (13.1).
- After bouncing off long-term technical support, the stock has gained momentum and just crossed its 200 day moving average (See Chart).
Disclosure: I am long CSX.