For this week’s Boomer Dick and Dividends we look once again at 🚂🚂Choo Choo! No one knows what the fuck is going on with CLOV hard to tell with that ticker if they are selling healthcare or some other clever name for weed stonks anyway. RIDE bombed out of their Desert race so EVs that aren’t Tesla are going to remain fucked because it seems like new millennial mechanics can’t figure out how to actually use a DC motor after hyping it for over a decade. (Hint: Plug in motor = ⏩⏩)
CSX is set for earnings this week and they will almost certainly beat expectations.
Why? Well there is a handy tool to track rail traffic for CSX available on their own site to track performance metrics which includes the number of rail cars online at any given time.
If you download the data it shows that the number of cars online hasn’t been this high since 2018 (so not just beating out the pandemic numbers but smashing 2019 as well). Previous years had much higher numbers but CSX did major efficiency cuts in 2017 that removed thousands of employees and areas that weren’t running well. (You can also see in the data velocity in 2017 was 14.7mph and is now 20mph).
The short of it is that rail traffic appears to be up about 17% (technically it is 17% more cars online at a given time) while earnings estimates are pegging it at a 7% increase.
(Example of earning estimate stating this just recently https://finance.yahoo.com/news/csx-report-q1-earnings-low-155803201.html)
On top of that the the rail cost index was near an all time high in Q1 (https://www.aar.org/rail-cost-indexes/) which means that prices on rail freight were UP UP UP. So they are moving more 🚂and charging 💵💰. If you looks at earnings estimates regardless of the firm everyone seems to be pegging them at a slight increase from 2020 when the 17% increase was a sharp and almost immediate change on the year.
If you need further confirmation from a non-CSX source the AAR also confirms that traffic is back to prepandemic levels of you remove the february blip from the Texas freeze. CSX doesn’t operate any lines in Texas so it is reasonable to assume that they weren’t majorly impacted as their own data displays. https://www.aar.org/data-center/rail-traffic-data/
To top it off there is not a single part of the transportation industry that isn’t struggling to meet demand right now. CSX isn’t going to be a magical exception and just have small growth when they have major lines throughout the major manufacturing centers of the Eastern US. You can bet that they are doing it with less employees due to across the board labor shortages (listed as a concern in their annual report) and with an increasingly energy efficient line of 🚂 since they have been investing in and showing upgrades for years.
CSX is a profit heavy industry with government support that consistently out paces SPY as a long term investment even if you ignore the 1% per year dividend.
CSX is going to beat earnings because earnings were assuming moderate recovery vs the explosive recovery we got. Almost no reason to doubt this and no reason to doubt they continue to do well throughout the year because as you can see in sky rocketing commodities pricing we simply cannot meat the demand for materials right now. 🚂 Are much 💪 vs tiny 🚛 when it comes to moving things like wood, steel and copper across the nation to be processed.
CSX didn’t get hit by the Texas shutdown as they are an east coast outlet. This means they will look better than several competitors with lines closer to or inside of Texas
CSX like all the major railroads prints money with a 27%ish profit margin year to year. Railroads are a lifeblood to American supply lines that tend to do alright even in bad years. Government support and regulations keep the industry wide stability and growth in place with more and more companies realizing that rail is the ideal way to move bulk goods when you have smart systems to plan around the delivery dates. As long as Tony Musk and Tim 🍏 don’t start shooting our goods down 🧲 tubes soon railroads are going to be good for a while.
Cons: Good earnings reports don’t always mean good stock prices 😕🙃. Lots of unexpected things can come up and sometimes the stock gets bought up leading to the report and then dumped. (Stonks did not like the last report but it also wasn’t really that good). $CSX did show very strong and steady growth after the last report so the real question is if there is a drop off on the report or not. I lean towards no dip but it would suck to buy now and miss the dip since the last one was $10 drop 😕🚂💥.
Time based Efficiency metrics are down a bit for Q1. Trains are slightly slower and dwell times at stations are slightly longer. Mostly labor based but it’s still an issue for the slowest form of transit to move slower (note that vs 4 years ago they are 30%+ better).
🚂 Are an amazing and under appreciated form of transportation. They are incredibly 👕 so the Democrats currently in power love them and they are big tough machines so Republicans tend to love them too! It’s vastly agreed upon that is long as you are a properly 💉 citizen that you will almost certainly love 🚂 and the way they follow simple patterns too! 💉💉💉💉⬆️🆙⏫=🚂🚂🚂🚂⏫🆙⬆️
Dividends: Essentially comes out to about 1% of the stock price per year if you hold it that long. More or less free growth on something already beating SPY YOY.
Positions: I don’t have any 😕. Just saw this coming weeks earning notice has CSX. Looked and saw it didn’t appear to have a pre-earnings spike and decided that the rail data should probably show increased traffic since my companies rail cars keep getting stuck in station traffic. The data shows a 17% increase in traffic and now I wish I had $CSX but I can’t buy it til tomorrow.
Recommendations: Worst case scenario is probably that earnings randomly tank it for no good reason. Last time it took a month to recover on bad earnings so if you aren’t going to do shares then buy a call that ends a month from now. No puts. 🚂💥🌈🐻