CSX Corporation CSX Is likely to witness a rebound and strong growth in volume in 2021, while its cost-saving initiatives could limit downside risk, according to UBS.
The CSX Analyst
Thomas Wadewitz upgraded CSX Corp. from Neutral to Buy and raised the price target from $63 to $80.
The CSX Thesis
CSX Corp. is likely to gain market share versus trucking in 2021 and achieve stronger volume growth than its rail peers, Wadewitz said in the Wednesday upgrade note. (See his track record here.)
The company is resilient and is likely to generate free cash flow of $2.1 billion in 2020 despite the tough backdrop, the analyst said.
Wadewitz said he expects the decline in volumes in 2020 versus 2018 to be similar to the 18.6% decline in volumes witnessed in 2009 versus 2007. He further expects a similar rebound in volumes this cycle, with volume growth of 8.8% in 2021.
The sharp cyclical decline in volumes gives CSX the opportunity to lower its structural costs, the analyst said.
“We believe consensus is anticipating a more muted lift in 2021 and our estimate of $4.45/share implies upside vs consensus of $4.14.”
CSX Price Action
Shares of CSX Corp. were trading 5.44% higher at $69.55 at the time of publication Wednesday.
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