We are upgrading our recommendation on CSX Corporation (CSX) to Outperform from Neutral based on the solid second-quarter results and an improving outlook along with overall volume gains in various commodity businesses. The company’s second-quarter results surpassed the Zacks Consensus Estimate on higher volumes.
Strong cost-control measures will likely to support margin expansion on volume improvement driven by the ongoing economic recovery. Intermodal is expected to be the company’s fastest-growing segment with its new service offerings.
The company’s strong and cash-rich balance sheet along with the shareholders’ return makes it attractive for long-term investment. This is consistent with our Outperform recommendation on the stock. Our target price of $64 is based on 16.5x our earnings estimate for 2011.