CSX Corporation

Methodology

CSX's railroad business shows moderate earnings cyclicality tied to industrial production and freight volumes, requiring attention to economic cycle positioning. The company's precision scheduled railroading improvements drive margin expansion that can temporarily inflate earnings growth. Fair value works best using normalized volumes and sustainable operating ratios around 55-60%.

Methodology

CSX typically trades at PEG ratios between 1.5-2.5x, reflecting premium valuations for its operational efficiency improvements and duopoly positioning in eastern U.S. rail. Volume growth remains constrained by GDP, but margin expansion provides earnings growth. PEG works well when considering the defensive infrastructure characteristics and pricing power.

Methodology

CSX pays a dividend yielding 1-2% with modest growth, making PEGY somewhat more attractive than PEG for this mature infrastructure asset. The company balances dividends with share buybacks and network maintenance capital spending. Total return benefits from steady yield plus earnings growth, positioning CSX as a defensive industrial with income characteristics.