Thursday, February 25, 2010

RailAmerica reports loss during fourth quarter

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Jacksonville, Fla.-based RailAmerica, Inc. Thursday reported a fourth-quarter earnings loss of $12.5 million, or 24 cents per share, compared with the company’s earnings of $6.0 million, or $0.14 per diluted share, for the comparable quarter of 2008. Total net loss, which includes discontinued operations of the company’s Ottawa Valley Railway (OVR), was $6.9 million, compared to net income of $8.9 million for the fourth quarter of 2008.

The results still beat the estimates of Morgan Stanley analysts William Green and John Godyn, who observed that the company’s “operating income of $22.8 million (adding back $6.3 million in non-cash IPO charges and $2.3 million of OVR discontinued operations) exceeded our forecast of $21.4 million.” But, they cautioned, “the combination of RA's OVR sale (and plans to report discontinued operations income), stale consensus estimates, and presence of other below-the-line adjustments in 4Q09 creates downside risk vs. consensus (though frankly we're not sure how consensus will treat all of these adjustments yet).”

Dahlman Rose & Co. Director Equity Research and Railway Age Contributing Editor Jason Seidl believes that RailAmerica’s long term growth prospects “remain favorable as industry volumes continue to recover and the company makes forward steps towards external growth opportunities in a fertile short line acquisition market. [However], in order to build investor confidence, RailAmerica, with its highly capable management team, must prove sound and timely execution by delivering solid results in its existing businesses. While the company has set a 70% operating ratio target for the next few years, we believe that leaves many questions unanswered regarding 2010 and 2011.  Hence, it is a question of when the company will be able to reach its aggressive goal. As such, we remain on the sidelines pending further operational improvements, more definitive outlook, and/or a more compelling entry point.”  

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In a statement, RailAmerica President and Chief Executive Officer John Giles said, "In the fourth quarter we posted solid financial results as we increased Adjusted EBITDA 1% to $33.5 million in a challenging economic environment. Excluding the $6.3 million IPO-related charge our operating income was up 7% for the quarter to $20.5 million. This was a result of our continued focus on running safe railroads and driving operating efficiencies. With the completion of the IPO and the OVR transaction, we have strengthened our balance sheet and are well positioned to pursue external growth opportunities. We will apply the same discipline to strategic investments that we have used over the past three years to improve the company's operational and financial performance."

Giles continued, "Although still evolving, we are encouraged by the recent growth in carloads and have positioned RailAmerica for strong performance as volumes improve. This year, we plan to maintain a sharp focus on our three strategic priorities: delivering organic growth and efficiency gains, strengthening our balance sheet, and capitalizing on external growth opportunities."