CSX Corporation’s (CSX) first quarter earnings of 78 cents per share were ahead of the Zacks Consensus Estimate of 69 cents. Earnings were up 22% from 64 cents in the year-ago quarter. Results were helped by increased revenues due to volume improvement in chemicals, agricultural products, metals, fertilizers and automotives in the wake of the improving economy.
Revenue increased 11% year-over-year to $2.35 billion due to volume improvements in the recovering economy. However, coal is expected to remain a headwind into 2010 due to utility stockpiles that are above target levels.
Operating expense increased 7.7% year-over-year to $1.9 billion due to an increase in labor & fringe expense, depreciation and fuel expense. Layoffs and employee furloughs led to a decrease in the number of employees to 29,310 from 31,175 in the comparable period last year.
Operating ratio improved 230 basis points year-over-year to 74.5% due to higher revenues and productivity gains.
CSX Corp., which has set the ball rolling for the earnings for transportation sector signaled that the economy is showing modest improvement. The main concern for the company is coal, which is expected to exert a downward pressure on the bottom line for remainder of this year. However, the company’s strong cost controls will likely support margin expansion as industry volumes return.
We expect other companies in this sector to benefit from the improvement in the broader economy after suffering for the past two years at the hands of the recession. Competitors Union Pacific Corp. (UNP) and Canadian National Railway Co. (CNI) are set to report earnings on April 22nd and 26th, respectively.
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