CSX Corp - Growth & Income
CSX Corp (CSX) just continues to impress. The railroad company recently delivered its 8th consecutive positive earnings surprise driven in large part by an improving U.S. economy.
Earnings estimates have been surging since the company posted better-than-expected fourth quarter results. Valuation is attractive too, with the stock sporting a PEG ratio of 0.9.
Fourth Quarter Results
CSX reported fourth quarter earnings per share of $1.14, beating the Zacks Consensus Estimate by 4 cents. It was a 48% increase over the same quarter in 2009.
Adjusted revenue increased 14% year-over-year driven by a solid 7% increase in overall volume. This directly reflects the improvement in the U.S. economy. The automotive segment was particularly strong, with volume jumping 18%.
Meanwhile, operating income surged 46% as the company was able to leverage its fixed expenses.
Earnings estimates have been rising steadily over the last several months as the economy gains momentum. Take a look at the stair-step climb in 2011 consensus estimates:
The Zacks Consensus Estimate for 2011 is now $4.98, up from $4.71 before the most recent earnings surprise. This corresponds to 23% growth over 2010 EPS. The 2012 estimate is currently $5.74, up from $5.42, and equating to 15% EPS growth.
It is a Zacks #1 Rank (Strong Buy) stock.
CSX pays a dividend that yields 1.5%. The company cut its dividend back in 2001 and held it steady through 2005. Since 2005, however, it has raised it 8 times at an average annual rate of 32.5%.
Its payout ratio is still relatively low at 26%, so expect more dividend increases to come.
The company has also been spending its free cash flow on share buybacks. In Q4, for instance, it spent $347 million repurchasing 5.6 million shares.
Although shares have risen nearly 50% since late August, valuation is still attractive because of rising earnings estimates.
Shares trade at 14.2x forward earnings, a discount to the industry average of 21.0x, and its PEG ratio is just 0.9.
This Week's Growth & Income Zacks Rank Buy Stocks:
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Todd Bunton is the Growth & Income Stock Strategist for Zacks.com.
The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.