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.
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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.
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.