Is CSX a Good Investment?

OVERVIEW

CSX Corporation is a company based in the United States. The company owns and operates railroad services across the United States. They operate over 3600 locomotives and other equipment needed to provide a rail-based freight transport service and own over 20,000 miles of track. The company transports raw materials like lumber, coal, iron ore, and oil. They also transport products like automobiles. The company was founded in 1978.

Why You Should?

  1. CSX is a great reopening play as the company performs well under a strong economy. As a strong economy returns, it will benefit both the company and its investors as the company sees a spike in the volume of freight as the industrial economy comes back online. The economy is gaining strength.
  2. The industrial economy has been hurt by trade tensions caused by the current administration. This caused a fall in demand from international buyers of agricultural and other commodities transported by CSX to and from the ports. However, the Biden administration looks to put an end to these trade tensions, which will benefit CSX.
  3. The COVID-19 Pandemic has caused a drop in freight volumes as the industrial economy around the world comes to a halt due to the impacts. This has negatively impacted CSX and it has had to implement several cost-cutting measures. These cost-cutting measures (putting locomotives in storage and cutting jobs) have been effective. This will help the company go through this time of economic recession.

Why You Should Not?

  1. CSX Corporation faces tough competition from other rail and freight transportation companies. These companies compete with CSX in an extremely price-sensitive industry. Some of these companies include Union Pacific, Kansas City Southern, J.B. Hunt, UPS, and many others. This competition might hurt CSX in the future.
  2. CSX has been negatively impacted due to the COVID-19 Pandemic. As global economies shut down and as the industrial economy grinds to a halt, CSX has seen weak freight volumes which has caused them to report weaker financial results. The company has also had to implement cost-cutting measures. This has also hurt the investors in this company.
  3. CSX has seen falling revenues way before this pandemic due to the slow growth of the global and industrial economy. This has further hurt investors in this company. However, the company does project a stronger global and industrial economy returning after this pandemic ends and also projects strong revenue and profit growth. In the financial year of 2019, the company reported revenues of around 11.94 billion and profits of around 3.3 billion. In the financial year of 2018, the company reported higher revenues of around 12.25 billion and slightly lower profits of around 3.31 billion.

MY OPINION

In my opinion, I think that CSX is a decent long-term investment because it is a good reopening play for an investor’s portfolio, the resolution of trade tensions, and its effective implementation of cost-cutting measures. However, competition, impacts from the COVID-19 Pandemic, and falling revenues due to a weak global and industrial economies.

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