Competitors
The Competitors of CSX and NSE are Kansas City Southern (NYSE:KSU), Canadian Pacific Railway Ltd, and Union Pacific.
Kansas City Southern
posted a revenue of $569 million, an increase of 7% from the corresponding quarter of 2011. The diluted EPS for the fourth quarter came in at $0.83. The revenue for the Canadian Pacific was also up by 2% in the fourth quarter. Union Pacific posted a new record earnings of $2.19 per share, increase of 10% compared to 2011.
Coal
Both CSX Corporation (NYSE:CSX) and Norfolk Southern have been affected by the declining demand of coal in the energy Industry due to increased demand of cheap natural gas from Shale fields. The coal is transported up to the market by rails whereas natural gas is supplied via pipeline, cutting out railroad completely. Coal is the single largest bulk cargo of these companies. The overall coal transported by train declined by 16% in January 2013. For the latest quarter, CSX’s coal volumes were down 19%, while Norfolk Southern’s was down 13%.
Which is better?
Both the companies face similar risks. The volume and revenue of railroad company largely depend on the economy. Both CSX and Norfolk have overlapping rail routes, which mean that it will keep the pricing competitive and efficient. A large portion of revenue comes from transporting coal. Both companies were hit by decrease in coal volume. Norfolk Southern Corp. (NYSE:NSC) is one of the fortune 500 companies, and so is the CSX. Norfolk ranks 241 out of 500 in the Fortune 500 with a market cap of US$23.08 billion. The ranking of CSX was 226 out of 500 with a market cap of 23.18 billion. Norfolk is the third largest railroad by revenues whereas CSX Corporation (NYSE:CSX) is ahead of Norfolk Southern Corp. (NYSE:NSC). CSX is the largest competitor to Norfolk in Eastern United States. Both companies cover similar territory and therefore both are capable of affecting the market perception of each other. CSX, one of the largest railroad companies, has declined more than 7% over the past year. NSC has declined by 17% over the past year. CSX operates approximately 21,000 miles in 23 U.S. states, while Norfolk operates 20,000 miles in 22U.S. states.
For the long term both the stocks will be a good addition to one’s portfolio, but if one really has to choose a winner it will be from the short term perspective. Considering the above factors we can say that CSX is slightly ahead of Norfolk Southern Corp. (NYSE:NSC). Except for a lower debt to equity, higher dividend, yield and coal factor; CSX Corporation (NYSE:CSX) leads on all parameters, including better earnings, better analyst reviews, less decline in share price than Norfolk, and other balance sheet parameters.
The article Which Railroad Stock to Pick Between These Two? originally appeared on Fool.com and is written by Aman Jain.
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