CSX Corporation (CSX) reports quarterly earnings January 16th. Analysts expect revenue of $3.14 billion and EPS of $0.99. The revenue estimate implies flat revenue growth sequentially. This could mark the third consecutive quarter that revenue was at or near $3.1 billion. Investors should focus on the following key items.

Rail Traffic Is Stagnant

For the week ending December 22nd, rail traffic and intermodal units were up 4.2% compared with the same week last year. Total carloads were up 1.7% for the first 51 weeks of the year. Rail traffic is one of the economy’s vital signs. Robust rail traffic indicates businesses are shipping more goods cross-country to meet consumer demand. This reflects rising business activity and economic growth.

Some of that growth may be ethereal. Municipalities may have stockpiled products in expectation of rising prices due to a pending trade war with China. Such artificial purchases may have spiked rail traffic in Q3 … By the first half of 2019, rail traffic could slow as the impact of such purchases begins to subside.

In Q3 2018, CSX’s quarterly revenue of $3.1 billion was up 14% Y/Y. Volume rose 4%, while pricing increased in the high-single digit range. Pursuant to revenue growth, Construction-related products (up 20%) and Coal (up 14%) led the way. Over 50% of the company’s revenue is derived from Industrial and Coal, and these two product groups could drive the narrative going forward. Read more:

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