CSX Ahead of Expectations

CSX Corp. (CSX - Analyst Report) reported earnings from continuing operations of $293 million or 74 cents per share, ahead of the Zacks Consensus Estimate of 71 cents per share.

Earnings were down $380 million or 93 cents per share in the prior year period. The decline was brought about by lower revenues, partially offset by reduced expenses.

Revenue for the period fell 23% to $2.3 billion due to significant declines in both volume and fuel recovery. However, management said that core pricing momentum has remained intact. CSX Corp. witnessed a 15% decline in volume during the quarter, led by a decline in shipments of coal, cars, construction and consumer goods.

Coal, which brings a major portion of the company’s revenue, has declined due to lower global demand. It has suffered due to low demand, high inventories and low gas prices.

Going further, management expects both domestic as well as global demand for coal to remain restrained. Utility stockpiles are also expected to remain above target levels, and natural gas prices should continue at low levels in the near term.

Operating expenses declined 24% year-over-year to $5 billion. The major contributor to the decline was fuel expenses, which shrank by $285 million. Management efforts to control costs led to a moderation in operating income to 73.9% from 75.2% in the prior-year quarter.

CSX Corp. has been hit by the global recession, witnessed by a decline in demand for its shipped goods. However, core pricing remains strong and is consistent with the prior quarters. Management remains optimistic as the rate of fall in volumes during the quarter was less than previous quarter.

A moderation in volume decline is a sign of gradual recovery in US economy. Management expects that demand for shipping will gradually pick up in the coming quarters.

Read the full analyst report on CSX