(The following story by Gregory Richards appeared on The Florida Times-Union on January 26.)
JACKSONVILLE, Fla. — Earnings at railroad giant CSX Corp. fell 46 percent in the fourth quarter because of costs associated with the pending sale of its international shipping terminal division.
But surging demand for freight transportation propelled the company’s revenue and operating income above the previous year’s figures.
Net earnings at Jacksonville-based CSX, which runs the country’s third largest railroad, were $66 million, or 30 cents per share, for the October-to-December period, down from $123 million, or 57 cents per share, during the same period in 2003. Taxes and other costs from sale of CSX’s World Terminals unit lowered quarterly net earnings by $93 million, or 41 cents per share.
In December, CSX agreed to sell its terminal division, which operates nine shipping terminals throughout Asia, Australia and Europe, to Dubai Ports International for $1.2 billion. The deal is expected to be completed early in 2005. That sale will enable CSX to “sharpen its focus” on its core surface transportation business — encompassing its railroad and intermodal service — Michael Ward, CSX’s chairman and chief executive officer, told analysts Tuesday on a conference call.
Financials for the surface transportation division showed signs of strength during the quarter. The division generated operating income of $315 million, up from $239 million the prior year, making it the fourth consecutive quarter of operating income growth. Surface transportation revenue was $2.2 billion for the quarter, a rise from $1.9 billion in 2003 and the 11th straight quarter of revenue gains. Last year’s figures contain an additional $7 million in operating income and $117 million in revenue because of the company’s 53-week fiscal reporting calender for 2004.
Excluding the costs of divesting its terminal operations, CSX had quarterly net earnings of 71 cents per share, beating the Wall Street consensus estimate of 62 cents per share, according to Thomson Financial.
“CSX’s earnings were driven by the continued strength in the economy and by improving operations,” Ward said in a statement.
Performance metrics for the quarter were mixed. Safety was a bright spot, with CSX’s personal injury rate dropping 12 percent for the quarter and its train accident rate falling 4 percent from the fourth quarter of 2003. But key operational measures — including on-time train originations and arrivals and train speed — all worsened from a year ago.
“CSX continues to have good success raising customer pricing but its operations, while slowly improving, remain poor,” Morgan Stanley analyst James Valentine wrote in a note to investors.
Tony Ingram, CSX’s chief operating officer, said on the conference call that fourth quarter train performance figures had improved from earlier in 2004. But he pledged to continue seeking improvements in safety, service and productivity.
Ingram also said CSX is continuing to refine its “One Plan,” a new system for routing and scheduling trains that was adopted last fall.
Revenue improved across most of CSX’s market segments, with the exception of automotive. But surging demand for hauling coal helped offset that, said Clarence Gooden, CSX’s chief commercial officer.
For all of 2004, CSX posted net earnings of $339 million, up from $246 million in 2003. Surface transportation revenue was $8 billion for the full year, beating the prior year’s $7.4 billion.
Ward said he’s optimistic for 2005’s outlook, both for the entire rail industry and CSX. With the need for freight transportation at an all-time high and with the trucking industry battling a driver shortage and congested highways, Ward told the analysts that the stage has been set for a “rail renaissance.”
“There’s a tremendous opportunity for rail to increase its share of the global logistics marketplace,” he told the analysts.
Ward said he’s confident CSX will be able to fully capitalize on what the marketplace may offer.
“We’re getting some momentum, people are feeling better about the company, there’s a little more bounce in people’s steps now,” he said. “People want to be part of a winner.”
CSX’s stock closed at $38.96, up $1.97, Tuesday on the New York Stock Exchange. The stock’s 52-week high is $40.46.