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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Spekulatius who wrote (49795)	10/18/2012 9:18:41 AM
From: gcrispin	2 Recommendations Respond to of 78744

I'm not sure how CSX can be a positive play on coal as there doesn't seem to be a catalyst to help in that area. A Bloomberg opinion piece outlines the stark reality facing coal. bloomberg.com CSX has hung in there with pricing and productivity gains. But without increases in revenues, (consolidated revenues were down 2%) CSX looks, at best, a play on the economy. (Currently, they have five hundred employees on furlough and more than three hundred engines in storage.) Below are comments regarding Deutsche Bank's downgrade. Deutsche Bank downgraded CSX (NYSE: CSX) from Buy to Hold with a price target of $20.00 (from $25.00). The firm comments, "We are downgrading shares of CSX to Hold (from Buy) as we now see a balanced risk/reward given coal headwinds (utility coal volumes are expected to continue to decline in H1 2013 and export volume comparisons are challenging given lower export thermal forward prices and weaker global economic growth forecasts). Despite expected core pricing gains and productivity improvements next year, we believe mix and coal headwinds will constrain earnings improvement as we are now modeling flat y/y EPS in 2013. As a result of these challenges, we have lowered our target P/E multiple to 11x, which implies a $20 PT using our 2013 EPS estimate of $1.78."

To: Spekulatius who wrote (49795)	10/18/2012 10:18:37 PM
From: Spekulatius	Respond to of 78744

Re CSX. - well, relative to UNP, CSX earnings look rather poor. CSX earnings and revenues are stagnating, while UNP had 5% revenue and 15% earnings growth, which is quite impressive. it might well be that UNP is worth the premium valuation relative to CSX. The difference in growth rates is quite large but it remains to be seen if, UNP can keep up the 15% earning growth that the analyst consensus suggest. I think they will need to accelerate their revenue growth, because 15% earnings growth and 5% revenue growth aren't likely in the longer run.