CSX CSX Corporation
Protected railroad cash flows, but stagnant volumes make today’s valuation hard to defend.
The story
CSX is a mature Eastern U.S. railroad with irreplaceable network assets, but its moat now protects cash flows more than it creates growth. Precision-scheduled railroading has already delivered much of the easy margin expansion, while coal exposure and weak volume trends keep the company in a slow-growth, buyback-heavy phase.
I trim year-one growth from 3% to 2% because revenue has continued to contract and the roughly five-year CAGR is now negative, but I keep the margin, capital efficiency, beta, and failure assumptions because the core railroad economics have not changed. The story remains modest pricing power and disciplined capex offset by stagnant volumes, coal decline, and limited remaining PSR upside.
Value drivers
| Revenue growth (Y1) | 2.0% |
| Terminal growth | 2.5% |
| Forecast horizon | 7y |
| Target operating margin | 35.5% |
| Years to target margin | 5 |
| Sales-to-capital | 0.44 |
| Beta | 1.05 |
| Failure probability | 1.0% |
| Cost of capital (WACC) | 8.7% |
| Terminal WACC | 8.5% |
Valuation bridge
| PV of explicit FCFF | 17.08B |
| PV of terminal value | 33.83B |
| Equity value | 32.38B |
| ÷ shares → per share | $17.42 |
News
bullish +0.20 · 8 articles
- Why Did CSX, PENG, UNH Stocks Ascend To 52-Week Highs Today?
- Are You Looking for a Top Momentum Pick? Why CSX (CSX) is a Great Choice
- 3 Reasons to Sell CSX and 1 Stock to Buy Instead
- 3 Unpopular Stocks We Approach with Caution
- Has CSX (CSX) Outpaced Other Transportation Stocks This Year?
- 3 Cash-Producing Stocks Walking a Fine Line
- CSX marks unique status with DC 250 rail event
- What You Need To Know Ahead of CSX Corporation's Earnings Release
Projected free cash flow to the firm
| Yr | Revenue | Growth | Margin | NOPAT | Reinvest | FCFF | PV |
|---|---|---|---|---|---|---|---|
| 1 | 14.43B | 2.0% | 34.4% | 3.80B | 643.23M | 3.16B | 2.91B |
| 2 | 14.73B | 2.1% | 34.6% | 3.91B | 683.43M | 3.23B | 2.74B |
| 3 | 15.05B | 2.2% | 34.9% | 4.03B | 725.57M | 3.31B | 2.58B |
| 4 | 15.39B | 2.2% | 35.2% | 4.15B | 769.81M | 3.39B | 2.43B |
| 5 | 15.75B | 2.3% | 35.5% | 4.29B | 816.28M | 3.47B | 2.29B |
| 6 | 16.13B | 2.4% | 35.5% | 4.39B | 865.16M | 3.52B | 2.14B |
| 7 | 16.54B | 2.5% | 35.5% | 4.50B | 916.62M | 3.58B | 2.00B |
Key risks
- Freight volume weakness persists longer than expected
- Coal decline and intermodal competition pressure revenue mix
- Labor, fuel, and maintenance costs prevent margin recovery
Catalysts
- Industrial production recovery improves carload growth
- Service quality gains support pricing and share in intermodal corridors