By Charley Blaine
Investing.com - On Monday and Tuesday, railroad giant CSX's shares hit 52-week highs. On Wednesday, the shares fell back and are falling again on Thursday.
The question is whether CSX (NASDAQ:CSX) is peaking. That 52-week high on Tuesday was immediately followed by a pullback and the shares ended the day down 0.7%. They're off another 1.9% since. And three days of declines will tell a chart-watching investor that maybe a trend has been established.
The consensus price target for CSX, according to analysts polled by Investing.com, is $76, which doesn't suggest there's much upside. Investing.com's technical indicators rate the stock a sell.
To be sure, CSX has had a big run since the end of 2017, rising nearly 43%. The stock rebounded 20.4% in the first quarter after slumping (like just about everyone else) in the fourth quarter.
And they weren't alone in the sector. The largest railroad companies in the United States and Canada all sported healthy first-quarter gains and, like CSX, were having big years in 2018 until that awful fourth-quarter slump set in. The S&P 500 fell 20% from the end of September though the end of the year. CSX fell 16.1%.
Railroad stocks have been rising as they start to make major moves to streamline their operations and boost their financial performance. The idea is not to let rail cars sit idle in big yards until all the cars going from, say, Nashville to Detroit, are in the same place.
The trick is to start building the train to Detroit as soon as possible when the cars first arrive from various places so that the departure can happen earlier. In the long run, it means fewer locomotives and fewer cars, lower costs and higher profits and earnings per share.
The idea is called "precision-scheduled railroading."
The industry has, mostly, been working on implementing these ideas, first pioneered by the late Hunter Harrison when he was CEO at railroads in Canada and then at CSX before he passed away in December 2017.
CSX had such a rocky transition implementing the new system, according to The Wall Street Journal, that the federal Surface Transportation Board ordered the company to brief officials weekly.
Eventually, the problems were worked out and other railroads started to work on their own plans. Wall Street was enthralled and the stocks all went up.
The question now is if the blip CSX shares have has seen in the last few days is only a little blip or something larger.
There is a broader issue at work. Dow Theory says stocks will move higher if the Dow Jones Industrial Average hits a new high along with a new high for the Dow Transports. The Dow is closest to hitting a new high. The Transports are still 16% below their 52-week highs, mostly because airline stocks, hypersensitive to moves in fuel prices, are really nowhere near the highs reached last year.