CSX Corporation (CSX) announced plan to hire approximately 90 workers in the Alabama region. The hiring will be mostly for maintenance and train operating positions.
Given the rising demand fir rail-based freight services, CSX Corp remains keen on enhancing its service capabilities. As a result, headcount increase has been one of the major areas on which the company has been focusing. Last year, the company added approximately 170 employees in Alabama.
In 2011, management raised the headcount at an accelerated rate to support increased customer demand and maintenance projects, signal installers for Positive Train Control and infrastructural development projects.
Looking forward to the rest of this year and beyond, we expect hiring to continue as major intermodal projects in the pipeline are being executed. CSX Corp. continues to invest in expanding network and terminal capacity, and enhancing safety, service and reliability for its customers. The company expects an investment of $2.25 billion this year and capital investment over 5 years at 18% of revenue.
The company has launched the National Gateway, a multi-year public-private infrastructure initiative, which will significantly improve the efficiency of the freight network between the Mid-Atlantic ports and the Midwest. Total project costs are approximately $850 million, of which CSX expects to contribute approximately $575 million. When completed, 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 2011.
Additionally, CSX has entered into a deal with Florida state regulators to deploy a computerized rail operation called SunRail. As per 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 plans to invest the $500 million sale proceeds from the deal in the development of Florida rail infrastructure.
Further, the company has also started providing intermodal business (transporting containerized cargo and truck trailers) to Maersk Line, the leading ocean carrier at APMT Container Terminal located in Portsmouth, Virginia
However, we remain cautious on the stock due to the company’s capital intensive nature and unionized workforce, as well as increased competition and railroad regulation. The company’s primary rail competitor is Norfolk Southern Corp. (NSC), which operates mostly across the length and breath of CSX Corp.’s territory.
CSX Corp. currently retains our long-term Neutral recommendation, supported by the Zacks #3 Rank (Hold).
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