CSX Corp. late Tuesday said its fourth-quarter earnings were up 23% compared with the same quarter a year ago, with earnings per share of 77 cents beating Wall Street analyst estimates by one cent. But analysts also acknowledged special circumstances for that gain and expressed some disappointment in the railroad’s slumping volume, attributed primarily to weak demand for coal.
Jacksonville, Fla.-based CSX last year sold its famed Greenbrier Hotel located in West Virginia; excluding that action of one year ago, CSX earnings from operations fell 16%.
Morgan Stanley analysts William Greene and Adam Longson commented: “CSX's 4Q09 operating income shortfall vs. consensus and tepid views on both coal (likely to remain depressed through 2010) and domestic intermodal (pricing pressure continues) are likely to fuel bearish sentiment around rails.”
Green and Longson added, “Though CSX reported a headline beat of $0.77 vs. consensus of $0.76, consistent with our model, an unexpected tax benefit of $15 million accounted for ~$0.04 of the result. In fact, CSX missed our operating income forecast by $30 million or $0.05 per share with lower than expected revenue (other revenue in particular) driving much of the miss, offset slightly by better than expected operating costs. In the earnings release, management set a marginally bearish tone by specifically noting that they expect utility coal demand to remain weak well into 2010 and that competitive truck pricing continued to weigh on domestic intermodal yields.”
They concluded: “Looking forward, we see high likelihood of a pullback during the 4Q09 earnings season; however, we expect such an event will prove to be a buying opportunity, as it was during 3Q09 earnings, if it occurs. Long-term, we reiterate our Attractive View on rails as a result of growth driven by (1) pricing power, (2) productivity improvements, and (3) rebounding volumes.”
Said CSX Chairman, President, and CEO Michael Ward in a statement, "The economy continued to show modest, sequential improvement in the quarter.” He added, “CSX worked aggressively on gaining operating leverage and further strengthening the fundamentals of our business for the future."