Barclays Reviews CSX Earnings, Says Coal Still 'Buzzkill'

In a report published Wednesday, Barclays analyst Brandon R. Oglenski maintained an Equal-Weight rating and $34 price target on CSX Corporation CSX. The analyst expects coal headwinds to adversely impact the company's Q2 results.

"While 2Q results are not as great as advertised, we still see some positives with improved network service metrics suggesting real productivity gains are being realized, at least relative to less robust outcomes in 1Q15," the analyst stated.

The company's guidance indicates marginally softer performance in 2H15, although productivity gains are likely to remain robust. The analyst expects a decline in export tonnage, along with lower domestic demand for coal in 2H15.

The Q2 results have been more in-line with expectations, rather than beating them, although the Q2 EPS marginally beat both the estimates and the consensus. The management has guided to high single-digit growth in EPS for 2015, due to the expected softness in coal.

"While fuel prices are the primary driver of lower costs in 2Q, we are encouraged to see some signs of efficiency. In particular, the workforce reduction initiative as well as improved car cycle times are helping relative to less robust outcomes earlier this year," the Barclays report elaborated.

In addition, the analyst believes that the management has a more aggressive operating plan in action, "holding customers accountable as well for improved car cycle times through mechanisms such as demurrage charges."