Investors were disappointed with CSX Corp.’s third-quarter earnings report, but the Jacksonville-based railroad company will soon have another chance to make an impression.
CSX has scheduled an Investor Day presentation Nov. 7, and analysts are looking forward to hearing CEO Joe Hinrichs’ outlook on the company’s future.
“In three weeks, Hinrichs will lead his first investor day as CSX CEO and CSX’s first investor day since March 2018 when leadership went a long way in restoring investor confidence just months after the death of CEO and change agent Hunter Harrison,” Susquehanna Financial Group analyst Bascome Majors said in a research note after CSX’s Oct. 16 earnings report.
“We look for Hinrichs to define his own yardstick for the success of his strategy, along with what rail macro backdrop is needed for investors and other stakeholders to judge that strategy fairly,” he said.
Harrison became CEO in March 2017 as part of an overhaul of CSX’s top management, and he began implementing a new operating strategy for the railroad. But he died in December 2017.
James Foote succeeded Harrison and served as CEO until retiring in September 2022, with Hinrichs joining the company to replace him.
“Hinrichs just started his third year leading CSX, with his tenure so far focused on improving relationships with customers and organized labor (after facing a near-miss nationwide rail strike in his first months on the job) and improving customer-facing service metrics and satisfaction, all while managing through market headwinds from truckload and broader industrial demand,” Majors said.
After a two-year honeymoon period, investors and customers will “start to look more eagerly for tangible results from accelerating growth in CSX’s volumes and bottom line,” he said.
“We commend management for focusing on service-first and pushing for growth, but the question is what does demand-pull look like and will it bring the needed price/mix?” Morgan Stanley analyst Ravi Shanker said in a research note.
“The November 7 Investor Day could answer many of those questions, though at this time it seems unlikely that the LT guidance/commentary that we get will be materially different than what we got from Union Pacific Corp. last month, with similar questions surrounding it,” he said.
CSX officials said in their quarterly report they estimate a $50 million impact to fourth-quarter earnings because of Hurricanes Helene and Milton. But Hinrichs also said a softer coal market and reduced revenue from fuel surcharges are expected to reduce revenue by $200 million in the quarter.
CSX’s stock fell $2.38 to $33.09 on Oct. 17 after the earnings report.
Investing website MarketBeat listed nine analysts who lowered their price targets on the stock by $1 or $2 after the earnings report, but none of them lowered their ratings on the stock.
According to Yahoo Finance, 18 of 27 analysts following the company rate it at “buy” or “strong buy.”
Evercore ISI analyst Jonathan Chappell lowered his price target by $1 to $37 but maintained an “outperform” rating.
Chappell said in his research note that market bears worry about CSX overearning on coal, underperforming on freight volume and increasing labor costs.
In the earnings report, “the bear Bingo card was filled out,” he said.
“Collapsing coal prices? Check. Volume shortfall? Check. Elevated labor inflation? Check. Throw in one of the most damaging storms in U.S. history and the long tail of revenue/cost impact (into 1Q25) and the forecast reset is now complete,” he said.
“But we believe the valuation floor has now been met, and with few other shoes to drop, the upside from here outweighs the downside.”
CSX said Oct. 17 the U.S. Surface Transportation Board approved a transaction that will allow the company to operate a short line railroad in Alabama.
CSX announced the deal in June 2023 to partner with Canadian Pacific Kansas City to buy rail lines operated by Meridian & Bigbee Railroad from Genesee & Wyoming Inc.
Meridian & Bigbee operates a railroad between Mississippi and Alabama. CPKC will operate the segment between Meridian, Mississippi, and Myrtlewood, Alabama, and CSX will operate the segment east of Myrtlewood.
CSX said the transaction gives its freight customers more efficient access to markets in Texas, Mexico and the Southeastern U.S.
After a disappointing first half of 2024, Johnson & Johnson Vision reported improved results in the third quarter.
The Jacksonville-based subsidiary of medical products giant Johnson & Johnson reported third-quarter sales of $1.3 billion, up 4% operationally excluding the impact of foreign exchange rates on international sales.
Johnson & Johnson Vision produces Acuvue-brand contact lenses in Jacksonville and another facility in Ireland, and makes eye care surgical products in other plants.
Total vision sales fell 0.3% operationally to $2.54 billion in the first six months of this year, mainly because of inventory issues in the contact lens business.
Contact lens sales rebounded in the third quarter, rising 4.7% to $968 million as the company resolved the inventory issues, said Tim Schmid, worldwide chairman of Johnson & Johnson’s MedTech division.
“As we signaled in the first and second quarter, we expected to see improvement within our vision business, which typically has delivered solid mid-single-digit growth,” Schmid said in Johnson & Johnson’s Oct. 15 conference call with analysts.
“We had a tremendous third quarter, which really gives us confidence in an even stronger fourth,” he said.
Contact lens sales in the U.S. jumped 10.2% in the third quarter.
“This just really has been delivered from a stabilization of our distributor inventory in the U.S., (and) the fact that we’re able to get back to taking new wearer share now that we have unconstrained supply, especially within our astig (astigmatism) portfolio,” Schmid said.
New Jersey-based Johnson & Johnson’s total third-quarter sales rose 6.6% operationally to $22.4 billion, with adjusted earnings up 1.6% to $6.84 billion, or $2.82 a share.
Proficient Auto Logistics Inc.’s stock, which was already trading below its May initial public offering price, plunged to new lows Oct. 17 after saying third-quarter earnings will be lower than expected.
Jacksonville-based Proficient transports automobiles from manufacturers to dealers and a slowdown in auto production is affecting its results.
“As noted during the Company’s second quarter earnings call in early August, unit volumes slowed during June with the slowdown continuing into July,” Proficient said in a news release.
“Weakness in unit volumes continued throughout the third quarter of 2024, resulting in estimated unit volumes of flat to a decline of 1% compared to combined unit volumes for the third quarter of 2023.”
Proficient was formed by the merger of five auto transport companies, which was completed after the IPO. The third quarter was its first full quarter of operations.
The company is projecting revenue of $90 million to $92 million for the quarter, which would be 14% to 16% lower than the combined revenue of the merged companies last year.
“Given the reduced level of revenue and resulting loss of operating leverage, the Company expects that net income for the third quarter of 2024 will be significantly degraded compared to results reported for the quarter ended June 30,” it said.
Proficient reported revenue of $106.6 million and adjusted earnings of $4.2 million, or 28 cents a share, in the second quarter.
Proficient’s stock dropped $4.01 to $9.93 on Oct. 17 after the announcement and fell to a low of $8.78 on Oct. 22.
The shares sold for $15 in the IPO.
“Proficient tempered 2H24 revenue guidance following deteriorating demand conditions and expected seasonal headwinds from plant shutdowns. Still, expectations were set for sequential revenue growth through year-end, with two-thirds or more of revenue growth stemming from unit growth versus yield improvement,” Stifel analyst J. Bruce Chan said in a research note.
“The pre-announcement suggests management significantly underestimated the slope and speed of market deterioration — and especially the negative leverage to spot/contract mix associated with the soft volume, while also overestimating the expected benefit of the typical quarter-end push, in our view.”
However, Chan maintains a “buy” rating on the stock.
“This result was a gut punch, and while we expect soft market conditions to persist, trends are directionally better in 4Q24,” he said. “Our core investment thesis remains intact.”
Raymond James analyst Patrick Tyler Brown maintained his “outperform” rating.
“All said given the recent COO departure, a bevy of exogenous factors in the auto market, and this pre-release, it has been tough sledding for PAL post its IPO in May,” Brown said in his research note.
President and Chief Operating Officer Randy Beggs, who had been CEO of the company’s Jacksonville-based subsidiary before the five companies merged together, retired in August.
“This said, PAL remains levered to an improving auto market as conditions turn,” Brown said.
Truist Securities analyst Michael Roxland slightly raised his price target for timber and real estate company Rayonier Inc. in a report on packaging and paper and forest products stocks.
Roxland maintained his earnings estimate and a “hold” rating for Rayonier, but adjusted his price target to “tweak multiples given rising market valuations.”
He raised the target by $1 to $32, with the stock trading at $31.74 at the time of his Oct. 15 report.
“Continuing the trend from last quarter, 3Q was mixed across paper/forest products & packaging with better containerboard demand and stable pricing, uneven boxboard demand and mixed pricing depending on substrate, and mixed wood products pricing as single-family construction is in the early stages of a recovery,” Roxland said in his report on the sector ahead of third-quarter earnings reports.