(The Associated Press circulated the following story by Samantha Bomkamp on July 15.)
NEW YORK — As it continues to defend the strength of its operations and management team in a bitter proxy battle, freight railroad operator CSX Corp. said Tuesday its second-quarter earnings rose 19 percent on strong demand for coal, grain and metals.
The company also reaffirmed its full-year earnings prediction. The company is targeting a 2008 profit in the “upper end” of a range of $3.40 to $3.60 per share.
The Jacksonville, Fla.-based company earned $385 million, or 93 cents per share, in the June quarter, compared with $324 million, or 71 cents per share, a year earlier. Excluding tax-related gains, CSX earned 89 cents in the latest period.
Revenue rose 15 percent to $2.91 billion.
Analysts polled by Thomson Financial forecast a profit of 90 cents per share on revenue of $2.85 billion.
CSX said continued robust markets for U.S. coal exports, grain, ethanol, metals and phosphates and fertilizers drove results. Strong pricing in these markets offset a 3 percent slip in total volume.
“CSX continues to deliver significant value for shareholders and demonstrate the secular strength of our business,” CSX Chairman and Chief Executive Michael Ward said in a statement. “The strong earnings performance delivered by this team was supported by all-time records in revenue and operating income, despite the effects of a softer economy.”
While the company argues that its success is the product of a strong management team, some analysts suggest that the company’s improving operations have more to do with the pressure imposed by its activist hedge fund shareholders.
The hedge funds – TCI, which manages The Children’s Investment Master Fund, and 3G Capital – have asked CSX to present a plan to improve operations and replace current board members with little or no railroad experience.
The funds nominated a slate of five directors to CSX’s 12-seat board in December. The board’s makeup was voted on at the company’s annual meeting last month, but CSX said it won’t have the final results of the vote until next Friday.
Longbow Research analyst Lee Klaskow said in a telephone interview Tuesday that while second-quarter earnings beat his expectations, he suggests that the proxy battle and potential board shake-up is causing management to be “distracted.”
“(Management) is trying to do what’s best for shareholders, but the distractions are preventing management from keeping their eye on the ball,” Klaskow said.
Shares declined 14 cents to $57.75 in aftermarket electronic trading. The stock lost $2.46, or 4.1 percent, to $57.89 in the regular session.