Ricardo Pillai
7 min read
Is CSX a good stock to buy? We came across a bullish thesis on CSX Corporation on Astute Optics – US’s Substack. In this article, we will summarize the bulls’ thesis on CSX. CSX Corporation’s share were trading at around $52 on Friday with a forward P/E 0f 22.9.
This isn’t the first time we see a railroad company pitched as a great investment. CSX shares gained 47.8% over the last 12 months. Comparable stocks like Union Pacific (UNP) and Canadian Pacific Kansas City (CP) gained 41.9% and 21.3%, respectively, during the same period. Why are railroad stocks rising so much and is it really a good time to buy them?
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In April, we published an article about the 13 Best NASDAQ Stocks with Highest Dividends and CSX ranked #10 in that article. CSX returned nearly 25% since then. So, hedge funds were right about CSX. This article explains why Bank of America remains bullish on CSX amid solid railroad operating performance.
CSX Corporation operates one of the largest rail freight networks in the eastern United States, moving chemicals, farm products, automotive shipments, metals, containers, and coal. The central question for investors is whether CSX can turn its strong network and pricing power into enough earnings growth to justify a rich valuation. Revenue over the past year came in at $14.5 billion, up 2.5%, and profitability remains healthy, with efficiency also improving in the most recent quarter. The stock trades at a premium to its peers, meaning investors are already paying up for CSX to keep delivering.
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The bullish case rests on CSX’s high-quality rail network and its ability to run more efficiently across a strategically important footprint spanning roughly 20,000 route miles across 26 eastern states, with connections into Canada. A strong return on equity, solid margins, and healthy free cash flow generation — CSX produced $1.7 billion in free cash flow in fiscal 2025 — all point to a business model that’s working. If the company keeps improving operations and winning freight volume, bulls believe it can sustain strong returns even as the broader industry faces headwinds.
Management is also leaning on technology and partnerships to sharpen execution. CSX teamed up with Infosys and Microsoft to modernize its data systems and formed a coast-to-coast shipping alliance with BNSF Railway to expand its freight reach. Meanwhile, the industry is watching the proposed merger between Union Pacific and Norfolk Southern, which could reshape rail competition if it closes in 2027. With new CEO Steve Angel now at the helm following activist investor pressure, the market is watching closely for signs that management can speed up improvements and unlock more shareholder value.
