Stock Analysis on Net

CSX Corp. (NASDAQ:CSX)

This company has been moved to the archive! The financial data has not been updated since April 20, 2023.

Financial Reporting Quality: Aggregate Accruals 

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Earnings can be decomposed into cash and accrual components. The accrual component (aggregate accruals) has been found to have less persistence than the cash component, and therefore (1) earnings with higher accrual component are less persistent than earnings with smaller accrual component, all else equal; and (2) the cash component of earnings should receive a higher weighting evaluating company performance.


Balance-Sheet-Based Accruals Ratio

CSX Corp., balance sheet computation of aggregate accruals

US$ in millions

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Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018
Operating Assets
Total assets 41,912 40,531 39,793 38,257 36,729
Less: Cash and cash equivalents 1,958 2,239 3,129 958 858
Less: Short-term investments 129 77 2 996 253
Operating assets 39,825 38,215 36,662 36,303 35,618
Operating Liabilities
Total liabilities 29,287 27,031 26,683 26,394 24,149
Less: Current maturities of long-term debt 151 181 401 245 18
Less: Long-term debt, excluding current portion 17,896 16,185 16,304 15,993 14,739
Operating liabilities 11,240 10,665 9,978 10,156 9,392
 
Net operating assets1 28,585 27,550 26,684 26,147 26,226
Balance-sheet-based aggregate accruals2 1,035 866 537 (79)
Financial Ratio
Balance-sheet-based accruals ratio3 3.69% 3.19% 2.03% -0.30%
Benchmarks
Balance-Sheet-Based Accruals Ratio, Competitors4
FedEx Corp. 0.91% 6.93% 7.01%
Uber Technologies Inc. -40.74% 31.28%
Union Pacific Corp. 3.63% 2.46%
United Airlines Holdings Inc. 3.50% -2.74%
United Parcel Service Inc. 21.85% 29.53%
Balance-Sheet-Based Accruals Ratio, Sector
Transportation 1.50% 10.61% 200.00%
Balance-Sheet-Based Accruals Ratio, Industry
Industrials 0.29% 3.43% 200.00%

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

1 2022 Calculation
Net operating assets = Operating assets – Operating liabilities
= 39,82511,240 = 28,585

2 2022 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2022 – Net operating assets2021
= 28,58527,550 = 1,035

3 2022 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × 1,035 ÷ [(28,585 + 27,550) ÷ 2] = 3.69%

4 Click competitor name to see calculations.


Net Operating Assets
The net operating assets have shown a steady increase over the four-year period from December 31, 2019, to December 31, 2022. Specifically, the value increased from $26,147 million in 2019 to $28,585 million in 2022, representing a gradual upward trend. This indicates a consistent expansion of the company's net resources devoted to operations.
Balance-sheet-based Aggregate Accruals
The balance-sheet-based aggregate accruals exhibited a marked upward trend during the same period. Starting from negative $79 million in 2019, the accruals shifted into positive territory by 2020, reaching $537 million, and continued to rise substantially to $1,035 million in 2022. This increasing magnitude of accruals could suggest more aggressive revenue recognition or expense deferrals over time.
Balance-sheet-based Accruals Ratio
The accruals ratio, expressed as a percentage of net operating assets, also rose steadily. It moved from -0.3% in 2019, which indicates a slight release of accruals relative to net operating assets, to 3.69% in 2022. The continuous increase in this ratio corroborates the growth in aggregate accruals and may imply a trend toward higher accrual-based earnings components relative to operating assets.

Cash-Flow-Statement-Based Accruals Ratio

CSX Corp., cash flow statement computation of aggregate accruals

US$ in millions

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Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018
Net earnings 4,166 3,781 2,765 3,331 3,309
Less: Net cash provided by operating activities 5,619 5,099 4,263 4,850 4,641
Less: Net cash used in investing activities (2,131) (1,877) (649) (2,102) (1,684)
Cash-flow-statement-based aggregate accruals 678 559 (849) 583 352
Financial Ratio
Cash-flow-statement-based accruals ratio1 2.42% 2.06% -3.21% 2.23%
Benchmarks
Cash-Flow-Statement-Based Accruals Ratio, Competitors2
FedEx Corp. 2.12% 3.01% 5.95%
Uber Technologies Inc. -49.13% 6.66%
Union Pacific Corp. 2.53% 0.47%
United Airlines Holdings Inc. 38.00% -10.59%
United Parcel Service Inc. 17.11% 7.63%
Cash-Flow-Statement-Based Accruals Ratio, Sector
Transportation 4.81% 1.28% -9.67%
Cash-Flow-Statement-Based Accruals Ratio, Industry
Industrials -2.31% -8.91% -5.18%

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

1 2022 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × 678 ÷ [(28,585 + 27,550) ÷ 2] = 2.42%

2 Click competitor name to see calculations.


Net Operating Assets
The net operating assets show a consistent upward trend over the four-year period. Starting at 26,147 million US dollars in 2019, they increased gradually each year, reaching 28,585 million US dollars by the end of 2022. This steady growth suggests expansion or increased investment in operating assets.
Cash-flow-statement-based Aggregate Accruals
The aggregate accruals exhibit more volatility compared to net operating assets. In 2019, the figure was positive at 583 million US dollars but shifted sharply to a negative value of -849 million in 2020, indicating a reversal in accrual accounting. Subsequently, the value returned to positive figures in 2021 and 2022, recorded at 559 million and 678 million US dollars respectively. This fluctuation points to variability in earnings quality or timing differences between cash flows and reported earnings.
Cash-flow-statement-based Accruals Ratio
The accruals ratio mirrors the volatility seen in aggregate accruals. It started at 2.23% in 2019, dropped to a significant negative ratio of -3.21% in 2020, and then rebounded to positive values of 2.06% and 2.42% in 2021 and 2022 respectively. The negative ratio in 2020 suggests that cash flows exceeded earnings, possibly reflecting a timing difference or earnings management for that year. The return to positive ratios indicates a normalization of accruals relative to net operating assets.