Leading rail transportation company CSX Corporation (CSX) has come out with its 2011 Corporate Social Responsibility (CSR) report. The report highlights the company’s performance based on various operational, environmental, social and financial aspects.
The CSR reports projects CSX Corp’s role as a significant contributor to the economy, generating substantial employment opportunities and building infrastructure through intensive capital investments. In 2011, CSX Corp. hired approximately 4,000 employees with plans to recruit an additional 3,000 this year.
The company invested approximately $2.2 billion last year and intends to spend approximately $2.25 billion this year. The report also highlights the operational efficiency achieved by the company last year with record-low operating ratio of 70.9%.
Further, the CSR report reflects the company’s achievements in protecting the environment. It states that CSX Corp. was successful in bringing its greenhouse gas emissions intensity down by 8% from the 2006 level and currently targets a 6% reduction by 2020.
We believe that the CSR report remains beneficial for shareholders, customers, employees and other associated parties of CSX Corp. The report underpins major functional areas of the company and presents its financial capabilities and social responsibilities for the long term.
We also believe that favorable rail industry pricing, fuel recoveries and operational improvement will aid the company’s top-line growth and drive earnings going forward. The company reaffirmed its earnings per share growth target of 20% till 2015. Further, we believe that through improved cost-control measures and service levels, CSX can achieve its long-term operating ratio target of 65% within 2015.
However, we remain cautious on CSX Corp. given the declines in coal volumes, which constitute a significant part of its business. Further, the company’s capital intensive nature, unionized workforce, increased competition from major railroads like Norfolk Southern Corp. (NSC) as well as strict railroad regulations keep us on the sidelines.
We maintain our long-term Neutral rating on CSX Corporation. For the short-term (1-3 months) the stock holds a Zacks #2 Rank (Buy).
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