CSX Moved to 'Top Pick' by UBS

The lingering misconception of mismanagement at CSX Corp. is the only plausible explanation for why the railway is trading at a discount to its peers, according to UBS analyst Rick Paterson.

Based on its current valuation, the Jacksonville, Fla.-based railroad trades at 22% price-earnings ratio discount to other top-tier rails. But with stronger pricing power and more room than its peers for margin improvement, Mr. Paterson has a “buy” rating on the stock and a $51 price target.

CSX was trading at $29.98 a share as of 10:16 a.m. on the New York Stock Exchange Tuesday.

“The only pushback we get on CSX relative to the group remains the “poor management” criticism. Four or five years ago that was probably true, but we think those days are long gone and (mis)perception is lagging reality. These guys know what they’re doing,” Mr. Paterson said.

“If anything, we believe CSX deserves a premium to the group, not a discount,” he added.

As such, Mr. Paterson moved CSX to his top pick Tuesday, replacing Union Pacific, based on its current valuation and its short term opportunities.

He also noted he still prefers Canadian National Railway Co. (CNI) to Canadian Pacific Railway Ltd. (CP) in Canada.

Comments

[DanielG:]

Has anyone had this rube from UBS tested for drugs?
The reason for the conception about CSX managment being inept is there for a reason....because its true!
Then again they do care about the stockholders cause they don't give a rip about customer service!
I also find the reasoning most fascinating...they are down so low that they have the best chance to go the farthest upward? Sorta like laying in the gutter and you can SEE THE STARS!
Oh well, seen this all before. Hope it goes to a hundred so I can retire from this goofy place soon enough.

May 26 09:59 PM

[DanielG:]

Gee, so darn dissappointed that this got no catcalls from the suck section.
Oh well I tried.

May 28 09:46 PM

[User 422920:]

Mr. Paterson is exactly right. But....the only problem with the CSX senior management is the way they treat the mid-level managers and craft employees. CSX has the lowest morale of any major corporation. Every employee I have talked to hates to work there. If they would improve the morale the productivity would go through the roof.

May 31 02:28 PM

[User 427154:]

if csx would keep enough employees to run trains and service customers they might be worth a crap.
csx philosophy is they don't care if they don't have crews to run a train or deliver railcars when a customer wants it. they are going to get their money from a train sooner or later. they rather lose a $20k train than pay a couple more crewmen on the extra board a few bucks guarantee money. just hauling 3 car loads of raw fertilizer material will pay a crew to move a train no matter what the size and keep the customer happy. but they rather not. its probably why rail customers are complaining to congress about the exorbitant rates the carriers charge in their 'monopoly' and why shipments by rail are down.

Jun 07 01:49 PM