An Opportunity for the Patient


Taesik Yoon Image Taesik Yoon Editor, Forbes Investor and Forbes Special Situation Survey

One of the leading indicators in the market is the health of the transports, especially US rail. This company is giving off every indication that the economy may be on the mend sooner than we expect, observes Taesik Yoon of Forbes Investor.

CSX (CSX) is a leading domestic railroad operator. The company provides rail, intermodal, and rail-to-truck services via 4,164 locomotives and nearly 70,400 freight cars over 21,000 miles of tracks. Its railroad infrastructure connects 23 states in the Eastern US, the District of Columbia, and the Canadian provinces of Ontario and Quebec.

The company’s services fall into several categories. The Total Merchandise category, which produced 55.6% of all revenue through the first nine months of 2012, provides freight transportation for customers in eight major market segments: agricultural products, phosphates and fertilizers, food and consumer, chemical, automotive, metals, emerging markets, and forest products.

The Coal category, which generated 27.3% of revenue, delivers coal, coke, and iron ore from coal-mining customers in the Appalachian mountain region and the Illinois Basin to electric utilities and industrial manufacturers in the Northeast and Mid-Atlantic. It also transports coal shipments for export.

Intermodal (13.8% of revenues) provides coast-to-coast intermodal transportation services through company-operated trucks, terminals, and containers. Intermodal transportation can offer significant advantages over traditional long-haul trucking by combining the cost savings of rail transport with the flexibility of short-haul trucking.

Finally, the Other category includes revenues from demurrage, switching charges, and other incidentals, which added 3.3% to the company’s top line.

Because each major US railroad operator covers a specific region with little overlap, railroaders work in cooperation with one another to complete customer orders.