CSX 'solid and steady' despite Baltimore bridge collapse, say analysts

By James Rogers

Despite the impact of the Baltimore bridge collapse, analysts still found positives in CSX's first-quarter results Wednesday

CSX Corp. is taking a sales hit of up to $30 million a month following the Baltimore bridge collapse, although analysts still see plenty of positives in the railroad operator's first-quarter results, which it reported late Wednesday.

"CSX delivered solid results vs. falling expectations (Baltimore impacts, coal yields, tops-down service metrics), and our forecasts and target price are unchanged as better than expected margins balance these headwinds," wrote Susquehanna Financial Group analyst Bascome Majors, in a note released Thursday.

The railroad operator, whose network serves much of the eastern U.S., beat analysts' bottom line expectations in its first-quarter results, although profit and revenue declined year-over-year. CSX (CSX) said that it could lose between $25 million and $30 million in sales a month as a result of the Baltimore port closure following the collapse of the Francis Scott Key bridge. Much of the lost sales would be from coal, according to CSX.

Related: CSX says Baltimore port closures will cost it up to $30 million in monthly sales following bridge collapse

"Coal is facing several challenges on both the volume and RPU side, with a net $25-$30M monthly revenue impact while the Baltimore Bay cleanup is underway (through May, with incremental ramp adding to estimate 2.5 months of impact)," wrote Susquehanna Financial Group's Majors. "But underlying export coal demand remains strong, despite Q/Q commodity price declines that drive lagging pressure on coal yield."

"On the bright side, merchandise volumes are running well, including positive commentary on improving chemicals and forest products segments, and CSX has line of sight to industrial development projects starting to contribute to volumes later this year," Majors added. Susquehanna Financial Group maintained its positive rating and $44 price target for CSX.

CSX runs an export coal business in the Baltimore area. Speaking during a conference call to discuss the first-quarter results, CSX executives said that the company has already begun to steer its trains elsewhere.

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Citing a decline in coal pricing, CSX CFO Sean Pelkey described a mid to high single-digit decline in coal RPU from the first quarter to the second quarter. But he said that CSX still feels "pretty good" about its ability to continue momentum in this area. CSX's first-quarter coal volume was up 2% year-over in the first quarter, although this was offset by a 2% decline in all-in RPU largely due to fuel surcharge, the company said.

"As it relates to future quarters, CSX provided an estimated revenue impact from the closure of Port of Baltimore, while also giving a 2Q24 range to the much-watched coal RPU, and neither was as meaningful as feared," wrote Evercore ISI analyst Jonathan Chappell, in a note released Thursday. Evercore ISI maintained its outperform rating and $40 price target for CSX.

"2Q export coal shipments will be pressured by the Baltimore bridge collapse with management estimating a net revenue headwind of $25M-$30M for each month the port remains closed," wrote Benchmark analyst Nathan Martin, in a note released Thursday. "Importantly, export demand remains strong, and CSX is working to reroute a third or more of the traffic. As for intermodal, there should be minimal impact from the port outage with CSX expecting solid international growth on improving import levels and steady demand." Benchmark reiterated its buy rating and $40 price target for CSX.

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Of 29 analysts surveyed by FactSet, 20 have an overweight or buy rating, eight have a hold rating, and one has an underweight rating for CSX.

Earlier this month rival Norfolk Southern Corp. (NSC) said that its second-quarter revenue will be impacted by the bridge's collapse.

CSX shares rose 2.5% in premarket trades Thursday. Norfolk Southern shares are unchanged.

Bill Peters contributed.

-James Rogers

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04-18-24 0900ET

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