CSX Rolling Full Speed Ahead

By Douglas A. McIntyre Published May 8, 10:07AM EDT

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CSX (CSX) provides rail, intermodal and rail-to-truck transload services that are among the nation’s leading transportation companies, connecting more than 70 river, ocean and lake ports, as well as more than 200 short line railroads.

Its principal operating company, CSX Transportation Inc., operates the largest railroad in the eastern United States with a 37,170-mile rail network linking commercial markets in 23 states, the District of Columbia, and two Canadian provinces. Headquartered in Jacksonville, Florida, CSX is the gateway to the west for goods coming into eastern ports and the main hauler of products coming from the Midwest to be exported.

Earnings in 2006 grew 64% and CSX increased it’s dividend 50%. Management predicts record revenues cash flow and profits through 2010. The key drivers? Gas and ethanol. Diesel fuel price increases disproportionately affect trucking vs railroads. It has become increasingly cost ineffective to ship goods long distance by truck as prices have risen. This has pushed more users to go the the railroad who, due to this increased demand volume have been able to add fuel surcharges to offset their increased fuel costs. In ethanol, CSX experienced 24% volume growth in 2006 shipping the corn based fuel. CSX is the main shipper of ethanol from the Midwest to the east coast. It passes through it’s Chicago hub and from there to points east. This market will only continue to grow as mandates and demand do. When Archer Daniel’s (ADM) reports "strong ethanol demand", this is good for CSX.

These factors lead to CSX producing cash from operations of $2.1 billion, $1` billion higher than 2005. To return this to shareholders, at the end of 2006 the board approved another $2 billion to be completed by then end of 2008. Today’s announcement of another $1 billion means that a total of 15% of the company’s outstanding shares will be off the market by the end of next year. This is a huge win for shareholders.

The rail business is booming and CSX is doing its best to reward its shareholders.

I hold no position in CSX

Todd Sullivan

5/8/2007

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.