CSX Corporation (CSX) has introduced an improved Carbon Calculator to aid its customers in making supply chain decisions. The Calculator will compare carbon emissions by freight rail with long-haul trucks over similar routes and provide an insight over the significance of rail freight transportation over truck in terms of environmental benefits. In other words, it projects the efficiency of intermodal shipments in reducing carbon emissions.
Given the periodic rises in fuel price, shippers have been turning their attention toward more cost efficient intermodal freight transportation. As a result, rail intermodal has gained considerable market share against truck and continues to project an upward growth trajectory in the future. Pricing in this category has also registered substantial improvement given a tighter truckload market.
Consequently, CSX Corp. continues to invest in expanding its rail infrastructure in order to support such growth and gain competitive advantage over its peers like Norfolk Southern (NSC) and Union Pacific Corporation (UNP). The company has launched the National Gateway, a multi-year public-private infrastructure initiative, aimed at the efficiency of the freight network between the Mid-Atlantic ports and the Midwest.
Upon completion, the National Gateway is expected to reduce truck traffic and increase intermodal capacity on key corridors without increasing the number of trains, which we expect will improve the efficiency and profitability of the company. CSX Corp. has already launched a key part of this project, the Northwest Ohio Intermodal Terminal in early 2011. Total project costs are approximately $850 million, of which CSX expects to contribute approximately $575 million and the rest will be paid by state authorities.
Additionally, CSX has entered into a deal with Florida state regulators to deploy a computerized rail operation called SunRail. According to the contract, CSX will sell a 61-mile rail corridor to the State of Florida and in exchange receive exclusive rights to operate on the SunRail track. The new system is expected to start operations in 2014. Going forward, CSX plan to invest $500 million received from sale proceeds of the deal in the development of Florida rail infrastructure.
Overall, the company maintained its investment projection of $2.2 billion for the year and estimated capital investment over the 5-year period at 18% of revenue for infrastructural developments. We believe this will not only aid improvements in CSX’ intermodal facility and service metrics but will also stimulate its profitability over the long term.
We maintain our long-term Neutral rating on CSX Corporation, supported by a Zacks Rank # 3 (Hold).
