CSX Corporation’s (CSX) fourth quarter earnings from continuing operations of 77 cents per share were only a penny ahead of the Zacks Consensus Estimate. Earnings were down 16% from 92 cents last year.
Results were dragged down by lower revenues due to volume declines in coal, construction and consumer-related markets caused by the weak economy. Lower fuel surcharge recovery caused by a decline in fuel costs also strained earnings.
Revenue declined 13% year-over-year to $2.3 billion due to lower utility coal shipments resulting from diminished demand caused by continuing weakness in steel production, and lower global demand for exports. Coal is expected to remain a headwind into 2010, due to low domestic and global demand, utility stockpiles that are above target levels (and are at the highest level in a decade) and natural gas substitution.
Operating expense fell to $1.7 billion in the quarter, down 12% compared to last year, due to the company’s ongoing cost-cutting efforts network modifications, equipment storage, employee furloughs, reduced crew overtime, lower incentive compensation and layoffs. The number of employees was 29,417, lower than 33,363 in the comparable period last year.
Operating ratio of 74.9%, though up slightly in the quarter, was down at 74.7% for the full year. The ratio is expected to come down gradually as the full benefits of the cost-cutting measures are realized.
CSX Corporation’s full-year earnings fell 16% to $1.15 billion, or $2.91 per share. Revenue for 2009 dropped 20% to $9.04 billion.
Though management noted that the economy is showing modest improvement, the main concern is coal, which is expected to exert a downward pressure on the bottom line going forward. However, the company’s strong cost controls will likely support margin expansion as industry volumes return.
Competitors Union Pacific Corp. (UNP) and Burlington Northern Santa Fe Corp. (BNI) are set to report earnings Thursday.
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