Citi Expects CSX Estimates To Move Higher

Following the better-than-expected quarter from CSX Corporation CSX, Citi’s Christian Wetherbee expects the company to raise its full year targets. Wetherbee reiterated a Buy rating on the company, with a price target of $29.

Numbers To Move Up

The analyst mentioned the better-than-anticipated quarter was mainly driven on the top line by better yields and on the bottom line by lower MS&O costs.

“Given a still challenging volume environment, CSX is essentially a cost takeout story and the company delivered $96m in incremental productivity, taking the YTD total to $229m, only a little shy of its current full year target of $250m+,” Wetherbee noted.

Given that the benefits have been 1H weighted, the analyst expected the company to update its targets, exceeding the previous record of $280 million.

2Q Positive

“Headcount ended 2Q very lean supporting 2H estimates even with typical volume seasonality. Over all, this was a solid quarter that reduced 2H EPS risk and as such full year estimates are likely to move higher,” according to the Citi report.

Core pricing remained robust during 2Q16, with Merchandise and Intermodal pricing rising 4 percent, well above inflation, although sequentially flat.

Productivity came in at $96 million for 2Q, taking the year-to-date performance almost up to the FY guidance of over $250 million.

The 2016 EPS estimate has been raised $0.04 to $1.72.

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