Tuesday, April 13, 2010

CSX earnings beat analyst expectations

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CSX Corp. today announced a 22% year-over-year improvementin earnings per share from continuing operations in the first quarter. Earnings rose to $306million, or 78 cents per share, from $254 million, or 64 cents per share, inthe same period last year.

 

michael-ward-csx.jpg“CSX drove strong efficiencies in its operations andproduced outstanding results as the economy continued to recover,” said MichaelJ. Ward, chairman, president and chief executive officer (pictured). “We areparticularly proud of our excellent safety performance in the quarter, as ouremployees achieved record results in one of America’s safest industries.”

 

First quarter revenue increased 11% from the prior year tonearly $2.5 billion, with gains in most commodity groups. Higher revenuescombined with increased productivity resulted in a record first quarteroperating ratio of 74.5% and record first quarter operating income of $634million.

 

“Our focus on safety, service, and productivity haspositioned CSX to produce strong results as the recovery continues,” Ward said.“These results will enable the company to continue investing in its business tosupport the nation’s growing demand for freight transportation, while driving shareholdervalue.”

 

CSX has invested approximately $5 billion in its networkover the past three years, and is investing another $1.7 billion in 2010.

 

Dahlman Rose & Co. Director-Equity Research and Railway Age Contributing Editor Jason Seidl sees CSX's results as an indicator of overall rail industry strength: “CSX, which grappled with historically high utility coal stockpiles and harsh winter weather conditions, delivered revenues of $2.50 billion, beating both our and consensus estimates of $2.40 billion and $2.37 billion.  Despite a mere 5% growth in carloadings, revenue jumped 11% year over year as the pricing environment remained strong and fuel surcharges increased.  More important, the solid top line performance trickled down to the bottom line. We believe that CSX’s ability to accommodate incremental business without having to significantly ramp operating resources is a manifestation of the existence of operating leverage in the rail industry. CSX achieved overall core price increases around 5% in the quarter, which is at the high end of the company’s previous full year guidance, above our expectation. We are raising our earnings estimates to reflect a strengthening freight recovery, improving coal outlook, solid pricing, and high incremental margins. We continue to rate shares of CSX a buy as we believe there is ample upside for investors who wish to have exposure to the Class I railroad sector.