(Reuters circulated the following story on July 17.)
CHICAGO — Shares of CSX Corp. rose 6 percent on Wednesday after the railroad reported an profit in line with expectations late Tuesday as strong pricing offset declining freight volumes.
The railroad also said that it expected full-year earnings at the upper end of its previously stated range of $3.40 to $3.60 per share.
“We attribute the majority of the upside to favorable pricing actions and management’s ability to control costs in a declining freight environment,” Longbow Research analyst Lee Klaskow wrote in a note for clients.
In a conference call with analysts on Wednesday, company officials reiterated expectations that average prices at the railroad would rise by more than 6 percent in 2008 and would increase at a rate above inflation in 2009.
Morgan Stanley analyst William Greene said CSX had posted impressive earnings but that its shares were overpriced compared with some of its peers. CSX has been trading at 16.22 times expected earnings, compared with 15.62 times for Burlington Northern Santa Fe Corp (BNI.N: Quote, Profile, Research) and 15.03 times for Norfolk Southern Corp (NSC.N: Quote, Profile, Research).
“We still like the rails long-term, but a headline number relatively in line with consensus is hardly the type of performance that creates excitement in a momentum stock like CSX,” Greene wrote.
Like the other major U.S. railroads, CSX has posted higher profits in recent quarters as strong pricing has offset declining freight volumes in a weakening overall U.S. economy.
CSX has been engaged in a lengthy and bitter proxy battle with two hedge fund shareholders — The Children’s Investment Fund and 3G Capital Partners — that culminated in a vote at the company’s shareholder meeting in June on a dissident slate of five board members proposed by the two funds.
Railroad officials said on Wednesday that preliminary results of the vote should be ready either Wednesday or Thursday this week.
“It seems CSX has logged another solid quarter, despite stiff headwinds from the soft economy and higher fuel costs,” Longbow’s Klaskow wrote. “However, we remain on the sidelines until the dust has settled from the proxy battle in late July.”
In trade on the New York Stock Exchange, CSX shares were up $3.54 or 6.12 percent, at $61.43.