Morgan Stanley On CSX: 'Do They Know Something We Don't?'

CSX Corporation (NYSE: CSX) reported its fourth quarter results on Tuesday after market close.

William Greene of Morgan Stanley commented in a note on Thursday that “do they know something we don't?” was the most common question coming from investors after the company's “solid” fourth quarter print and “strong” 2015 commentary.

“There was some dissonance between investor fears that falling commodity prices portend a more bearish volume outlook for later in 2015 and management's view that falling fuel would outweigh any downside risks from volumes associated with industrial activity,” Greene wrote.

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Greene adds that rails represents a highly diversified business and it is unusual that any single commodity can cause a material downwards (or upwards) revision to estimates. The analyst adds that for some time a view has been maintained that the most important driver to rail earnings (pricing) is about to inflect upward, driving upside surprises across U.S. rails through 2015.

“We heard nothing on the call to dissuade us from that view, in fact, management commentary on pricing causes us to wonder if we're positive enough,” Greene added.

The analyst's 2015 and 2016 earnings per share estimates remain unchanged at $2.25 and $2.60, respectively.

Shares are Overweight rated with a $39 price target.