Now we know the answer: The "freight recession" at CSX (CSX) is not priced into the stock. It is falling precipitously.
This is so important because I believe many industrials will report numbers that are not positive year over year, and their stocks are down a great deal and yet they can still fall.
Now, CSX is in a unique position because it has so much coal. But one look at the breakdown year over year by all cargos is very discouraging.
Right now, only automobiles, minerals and waste and equipment are strong year over year. Intermodal is neutral, but agriculture, chemicals, domestic coal, export coal, food and consumer, metals and phosphates/fertilizers are all unfavorable.
A year ago at this time, 91% of the cargos were favorable, phosphate and fertilizers were neutral and only export coal was weak.
That's an incredible year-over-year decline. And it comes at a time when the absolutists on the Federal Reserve insist that rates should go higher.
Frankly, I question whether autos will be positive year over year and minerals, which are largely aggregates for roads, will peak unless the federal government starts building and fixing up more roads with the transportation bill.
Rails have huge capital budgets: CSX is spending $2.4 billion in 2016. Costs will be very good. But coal will be down big again in 2016, and while there should be $200 million in efficiency savings, they will not make up for the declines in cargos.
The stock of CSX tells you that there was still too much optimism going into the quarter, even as the stock has come down from $36 to $23 going into the quarter.
Only a takeover bid could get this thing back shortly, and I will not recommend stocks on a takeover basis.