Loop Capital Upgrades CSX After Encouraging Q2

CSX Corporation (NASDAQ: CSX) reported second-quarter results Tuesday that prompted Loop Capital Markets to turn bullish on the stock.

The Analyst

Loop analyst Rick Paterson upgraded CSX from Hold to Buy with a price target lifted from $65 to $78.

The Thesis

CSX's Q2 print makes it clear the rail line is making progress on the adoption of its scheduled operating model, as seen in an operating ratio improvement from 64.7 percent a year ago to 59.8 percent — excluding real estate gains —in the quarter, Paterson said in the upgrade note. (See the analyst's track record here.) 

The company appears to be well on track to achieve its full-year operating ratio goal of 60 percent by 2020, the analyst said. 

CSX continues to widen its lead over regional peer Norfolk Southern Corp. (NYSE: NSC) in relative operating efficiency and service, Paterson said. Encouragingly, this is resulting in margin improvements and should translate into future growth and market share gains, he said. 

An encouraging Q2 report and "no signs of standing still" prompted the analyst to lift his 2018 earnings per share estimate from $3.23 to $3.58, 2019's estimates from $3.90 to $4.24 and 2020's estimates from $4.30 to $4.61. 

Price Action

CSX shares were rallying 6.52 percent to $68.64 at the time of publication Wednesday. 

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