CSX Shares Decline

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  • Railroad reports lower earnings and revenue on reduced car loads.

    Shares of railroad company CSX (CSX) dropped around 10 percent on Wednesday, following earnings after the closing bell on Tuesday.

    CSX earned $1.08 per share in the second quarter, just missing the $1.11 per share expected by analysts. Revenue also came in at $3.06 billion, against an estimate of $3.14 billion.

    However, the real impact to the share price came from the company’s forward outlook. CSX expects revenue to fall as much as 2 percent in 2019, well below the previous forecast, which indicated likely growth of 1 to 2 percent.

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  • CSX transports goods on its railroad network, operating a regional monopoly. CSX did lose a big customer in the second quarter after Philadelphia Energy Solutions shut down the largest refinery on the East Coast following an explosion in June. The refinery alone accounted for 1 percent of CSX’s annual shipping volume.

    Action to take: While CSX may be sensitive to issues such as trade wars and a slowing economy, its role as a key piece of transportation infrastructure for shipping goods around makes it a worthwhile long-term holding.

    Given the size of the share pullback on Wednesday, investors may want to look at buying shares up to $72, and traders may want to bet on a bounce back by buying the January 2020 $80 call options as a leveraged way to play a short-term bounce.