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Loop Capital Says CSX's Recovery Seems To Be Lagging The Rest Of The Rails

CSX Corporation NYSE:CSX, Kansas City Southern NYSE:KSU - Loop Capital Says CSX's Recovery Seems To Be Lagging The Rest Of The Rails

The operational metrics of CSX Corporation CSX 0.14% since the 2014 capacity crunch have lagged other railroads, Loop Capital said, while maintaining its Hold rating and raising the price target by $1 to $31.

Loop Capital said CSX's year-to-date average train speed is 9 percent below its 2013 post-recession record, but this adjusts to a 12 percent deficit accounting for business mix given CSX now has far fewer slow coal trains.

On the same basis, the brokerage said Norfolk Southern Corp. NSC 0.38% is 4 percent below its 2012 peak, while Union Pacific Corporation UNP 0.01% and Kansas City Southern KSU 0.77% are setting new records this year. In terms of terminal dwell performance, CSX is second worst in the group, with dwell times almost 15 percent higher than its historic best.

Related Link: Halfway Through Q3, Loop Capital And Deutsche Bank Review Railroad Names

"The bottom line is that CSX's selective service and 28-hour operating initiatives have protected intermodal and auto market share and produced material benefits in terms of train length and locomotive asset intensity," analyst Rick Paterson wrote in a note.

Paterson noted that CSX may face some incremental share losses due to high crew overtime hours and a weaker manifest service offering versus Norfolk Southern.

Concerns

So, do investors need to worry?

"So far we would regard the net result as a positive given the 15 percent increase in train length in a soft economy is a very significant achievement in productivity. We expect overtime usage to naturally right size lower over time and it's really only the competitive dynamic with Norfolk Southern in the manifest business that investors need to be monitoring going forward," Paterson added.

At time of writing, shares of CSX were down 0.26 percent to $28.42.

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