Despite subdued shipping trends, analysts are taking notice of CSX Corp.’s service metrics in the third quarter. The company’s train velocity increased to an average of 17.6 miles per hour, up from 15.8 miles per hour in the same period last year. Additionally, CSX’s dwell time, the average time between car arrival and departure from the yard, decreased to an average of 9.6 hours from 11.8 hours in the previous year’s quarter.
Analysts’ Positive Outlook
Following CSX Corp.’s strong performance, Evercore ISI raised its price target for the company to $36 from $35. In a note released on Friday, Evercore analyst Jonathan Chappell mentioned the operational and service momentum at CSX and expressed optimism for potential revenue growth. However, Chappell also noted that the resources required to maintain a high level of service may impact margins.
Susquehanna Financial Group also increased its CSX price target to $35 from $33 based on the company’s impressive service performance. Analyst Bascome Majors mentioned that CSX continues to deliver solid service metrics and performs better than expected in terms of macro volumes (excluding international intermodal). Majors also expressed confidence that new Chief Operating Officer Mike Cory will positively impact operational efficiency and corporate culture in the long run.
Intermodal Trip Plan Performance
CSX’s intermodal trip plan performance improved to 94% compared to 90% in the previous year’s quarter. Intermodal trip plan performance refers to the percentage of measured containers destined for a customer that complete their scheduled plan at or before the estimated time of arrival. This excludes port shipments, empty containers, and other nonscheduled services.
CEO Joseph Hinrichs mentioned during the conference call to discuss the company’s results that as the truck market rebounds and costs continue to rise, CSX Corp. has the potential to be more competitive against trucks, allowing for increased business off the road.
CSX Corp.’s strong performance in the third quarter has resonated with analysts, who see potential for further growth and improved operational efficiency under the leadership of its new Chief Operating Officer. As the company continues to deliver solid service metrics and enhance its competitiveness, it remains well-positioned for success in the long term.
Jacksonville-based Company Sees Improvements in Carload Trip Plan Performance
The Jacksonville-based company has reported a significant increase in its carload trip plan performance. In the prior year’s quarter, it stood at 57%, but it has now risen to an impressive 82%. This performance metric measures the percentage of cars that meet their scheduled plan on time or earlier for a customer, excluding unit trains, nonscheduled services, and empty automotive shipments.
During the quarterly results conference call, Cory, an executive from the company, acknowledged a slight seasonal decline in service performance during the peak vacation and holiday season. However, he emphasized that the company’s metrics are already rebounding as they head into the fourth quarter.
An analyst from Raymond James, Patrick Tyler Brown, highlighted the company’s unwavering focus on service. In a note released on Friday, Brown praised the company’s dedication to improving service, firmly believing that this will ultimately drive long-term volume growth. He also noted that although there was a minor hiccup in service during August, all key service metrics, including intermodal and carload trip plan compliance, had recovered by the end of the quarter. These metrics not only improved from last year but also aligned with recent quarter trends. As a result, Raymond James reiterated its outperform rating for CSX, the Jacksonville-based company.
Echoing this positive sentiment, Christian Wetherbee, an analyst from Citi, acknowledged that CSX, like other railroads, faced a decline in volumes this year. However, he noted that CSX’s carloads have comparatively outperformed due to the company’s enhanced service. Wetherbee expressed confidence in CSX’s ability to achieve strong operating leverage in 2024 as rail volumes increase. As a result, Citi maintained its buy rating for CSX.
According to a FactSet survey of 28 analysts, 19 have rated CSX as overweight or a buy, while nine have given it a hold rating. This demonstrates the market’s positive outlook for the Jacksonville-based company.
Overall, CSX is experiencing notable improvements in its carload trip plan performance, driven by its relentless focus on service quality. The company remains optimistic about future volume growth, and analysts are confident in its ability to maintain its positive momentum.