Here is the last installment of stock picking week. It was so much fun that we will have to do it again in the near future.
Bull Pick – CSX Corp. (NYSE:CSX)
This “old” and “stodgy” railroad company is hitting on all cylinders and is providing exciting returns for investors. The stock is a whisker off of a new 52-week high and with good reason. CSX reported third-quarter earnings of $1.08 per share, beating the estimate by four cents. Sales also surpassed expectations and rose a healthy 16% over last year. That is no small feat for a mature company in an economically sensitive industry.
The good news kept on flowing from the report. It said that it will increase capital expenditures by $100 million and it will buy back $646 million of its stock by the end of the first quarter. These are moves that are only made by confident management teams. The stock is already up over 20% year-to-date, but has more upside.
Analysts have been ratcheting up their earnings estimates of late. Just over the past week, this year’s estimates have increased 13 cents to $4.02 per share. Next year’s numbers have risen 16 cents to $4.65 per share. The stock is reasonably valued at 13x next year’s estimates. I think that given the solid momentum in its business, the stock should hit $70-$75 per share over the next year.
Bear Pick –
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