CSX reports mixed fourth quarter earnings results

Last night, Class I railroad carrier CSX reported fourth quarter earnings of $426 million-or $0.42 per share-which was down 5.2 percent annually from $449 million and $0.44 per share a year ago and was down slightly was Wall Street estimates of $0.43 per share.

The Jacksonville, Fla.-based carrier said quarterly operating income of $3.032 billion was up 5 percent annually and paced by its merchandise and intermodal business units. And quarterly operating income–at $813 million-dipped 2 percent year-over-year. CSX officials said that overall quarterly operations were “resilient” in spite of increase volume and harsh weather at the end of the quarter.  For all of 2013, revenue rose 2.0 percent to a record $12.0 billion, with earnings per share at $1.83, up slightly from $1.79 in 2012.

Total second quarter volume was 1.662 million total units, representing a 6 percent annual gain. Intermodal was up 11 percent at 666,000 units, and chemical and automotive and agricultural products loadings at 137,000, 113,000, and 113,00 were up 18, 4, and 2 percent, respectively. Coal was down 5 percent at 289,000. Total merchandise was up 7 percent at 707,000 units.

“Revenue grew 5 percent in the quarter, with the ongoing headwinds from coal more than offset by broad-based growth in the merchandise and intermodal markets,” said Michael Ward, CSX President and CEO, on an earnings call earlier today. “This reflects an economy that is expanding. While we had a solid quarter from a top line and operational perspective, you can see that the revenue growth did not flow through to the bottom line as much as we would have liked. That is because there were a number of moving parts on the expense side between 2013 and 2012 that reduced the normal flow through we would have expected from the $137 million revenue gain.”

Based on fourth quarter volumes, Clarence Gooden, CSX executive vice president, sales and marketing, said on the call that growth in the merchandise and intermodal markets was partially offset by a decline in coal volumes and as a result merchandise and intermodal now account for 83 percent of total CSX volume and more than 75 percent of total revenue.

Revenue per unit for the quarter¬–at $1,824–was relatively flat, with the impact of core pricing gains and liquidated damages partially offset by the unfavorable mix impact related to the growth in intermodal versus the decline in coal, he said.

And Gooden said pricing on a same-store basis remains solid across nearly all markets served by CSX. CSX defines same-store the same-store sales as shipments with the same customer, commodity and car type, and the same origin and destination.

Core pricing for the quarter was 1.6 percent, which was even with the fourth quarter of 2012, which Gooden said reflects continued rate pressure in the export coal market and more modest increases in domestic coal pricing.

Looking to the first quarter of this year, Gooden was optimistic.

“We see favorable to stable conditions in 90 percent of our markets, and the overall volume outlook for the first quarter is positive,” he said. “Agricultural is favorable, with higher year-over-year crop yields supporting continued growth in grain shipments. The outlook for the automotive market is also favorable as North American light-vehicle production continues to grow. We expect growth in chemicals as we continue to capture opportunities created by the expanding oil and gas industry.”