CSX on track to reap benefits of strong service momentum, analysts say

The company’s service metrics, however, have caught the attention of analysts. During the third quarter, CSX’s train velocity averaged 17.6 miles per hour, up from 15.8 miles per hour in the same period last year. The company’s dwell time, which is the average amount of time between car arrival to and departure from the yard, averaged 9.6 hours, down from 11.8 hours in the prior year’s quarter.

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Evercore ISI raised its CSX price target to $36 from $35 in a note released Friday. “There is much operational and service momentum at CSX exiting [the third quarter], and some macro tailwinds would go a long way in driving outsized revenue growth, but, in the meantime, the resources necessary to maintain a stronger level of service will weigh on margins,” Evercore analyst Jonathan Chappell wrote.

Susquehanna Financial Group also raised its CSX price target, to $35 from $33, citing the railroad company’s service performance. “CSX continues to deliver solid service metrics and better than macro volumes (ex-international intermodal), and we’re optimistic [new Chief Operating Officer] Mike Cory will be additive to both operations and culture over the long term,” analyst Bascome Majors wrote.

CSX’s intermodal trip plan performance was 94%, up from 90% in the prior year’s quarter. Intermodal trip plan performance is the percentage of measured containers, excluding port shipments along with empty containers and other nonscheduled service, destined for a customer that complete their scheduled plan at or ahead of the original estimated time of arrival, notification or interchange.

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“As the truck market starts to rebound and as costs continue to increase there, we can be even more competitive versus truck and get some more business off the road there,” CSX CEO Joseph Hinrichs said during the conference call to discuss the company’s results. 

The Jacksonville-based company’s carload trip plan performance was 82%, up from 57% in the prior year’s quarter. Carload trip plan performance is the percentage of measured cars, excluding unit trains and other nonscheduled service as well as empty automotive shipments, destined for a customer that complete their scheduled plan at or ahead of the original estimated time of arrival or interchange.

Speaking during the quarterly results conference call, Cory explained that the company’s service performance saw a slight seasonal dip in the middle of the quarter, during peak vacation and holiday season, but he said its metrics are rebounding into the fourth quarter.

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“Focus on service is crystal clear,” Raymond James analyst Patrick Tyler Brown wrote in a note released Friday. “We continue to remain maniacally focused on service as we remain steadfast in our belief that a turn in service will ultimately lead to volume growth longer term.”

He added: “Importantly, while the quarter did see a slight hiccup in service in August, all key service metrics including all important intermodal and carload trip plan compliance recovered by quarter end, improved from last year’s level, and came in generally in line with recent quarter trends.” Raymond James reiterated its outperform rating for CSX.

“Like other railroads CSX has seen volumes come under pressure [year to date], but carloads have relatively outperformed as CSX’s improved service appears to be winning share,” Citi analyst Christian Wetherbee wrote in a note released Thursday. “Service metrics have rebounded nicely and the company should realize strong operating leverage in 2024 as rail volumes increase.” Citi maintained its buy rating for CSX.

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Of 28 analysts surveyed by FactSet, 19 have an overweight or buy rating and nine have a hold rating for CSX.