NEW BULLISH Plays
CSX Corp. - CSX - close: 36.87 change: +0.20
Stop Loss: 36.25
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Entry on November -- at $---.--
Listed on November 19, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 7.2 million
New Positions: Yes, see below
Why We Like It:
CSX is in the services sector. They run a railroad and intermodal transport business that covers much of the U.S. and Canada. According to the company website, "CSX Corporation, together with its subsidiaries based in Jacksonville, Fla., is one of the nation's leading transportation suppliers. The company's rail and intermodal businesses provide rail-based transportation services including traditional rail service and the transport of intermodal containers and trailers.
Overall, the CSX Transportation network encompasses about 21,000 route miles of track in 23 states, the District of Columbia and the Canadian provinces of Ontario and Quebec. Our transportation network serves some of the largest population centers in the nation. Nearly two-thirds of Americans live within CSX's service territory.
CSX serves major markets in the eastern United States and has access to over 70 ocean, river and lake port terminals along the Atlantic and Gulf Coasts, the Mississippi River, the Great Lakes and the St. Lawrence Seaway. The company also has access to Pacific ports through alliances with western railroads."
The railroad stocks have been showing relative strength as the broader U.S. economy slowly improves. Weekly average carloads have hit levels not seen in years. CSX's most recent earnings report was October 14th and it was a record breaker with record revenue, operating income, net earnings and EPS.
Wall Street was expecting a profit of $0.48 per share on revenues of $3.18 billion. CSX reported $0.51 a share, which is a +13% increase from $0.45 a year ago. Revenues were up +7.9% to $3.22 billion.
Management said that "This performance was supported by volume increases of 7 percent, with broad-based growth across nearly all markets CSX serves." It was CSX's third earnings beat in a row.
CSX's Executive Vice President of Sales and Marketing and Chief Commercial Officer, Mr. Clarence Gooden, said,
"The underlying macro-economy remains strong and the data and our experience suggest a positive outlook for growth."
CSX is expecting steady growth in the fourth quarter and they see growth improving to double-digit earnings growth and margin strength in 2015.
When asked about the drop in oil prices CSX does not think the drop in oil will impact their business. CSX management said they have already signed more than 50% of their 2015 contracts. There has been some speculation that coal could impact the rail business but CSX believes domestic coal volumes will remain strong as utilities continue to rebuild their inventories.
Investors might like to know that CSX saw some big gains in October over M&A speculation. Evidently Canadian Pacific (CP) had approached CSX about a merger but CSX rejected the offer. That has revived the idea that the railroad industry could see more M&A.
Shares of CSX have spent the last few days consolidating sideways in the $36.40-37.00 zone. A breakout could be a new entry point. I'm suggesting a trigger to open bullish positions at $37.10.
Trigger @ $37.10
- Suggested Positions -
Buy CSX stock @ $37.10
- (or for more adventurous traders, try this option) -
Buy the 2015 Jan $37 call (CSX150117c37) current ask $1.20
Option Format: symbol-year-month-day-call-strike