(Reuters circulated the following article by Reshma Kapadia on October 28.)
NEW YORK — CSX Corp. on Thursday swung to a quarterly profit from a year-ago, as a gain related to the spinoff of Conrail helped offset service disruptions, some from storms, that weighed on volume growth.
The Jacksonville, Florida-based cargo hauler posted a third-quarter profit of $123 million, or 57 cents a share, after a net gain of $14 million, or 7 cents a share, related to the spinoff, compared with a year-earlier loss of $103 million, or 48 cents a share, when it took several charges.
Operating revenue at CSX (CSX.N: Quote, Profile, Research) , which owns the largest rail network in the eastern United States, rose 5 percent, to $1.98 billion, amid strong coal shipments, but volume growth was not as robust.
“Our service challenges didn’t allow CSX to keep pace with economic growth and then the storms that rolled across the network created a lot of severe disruptions so volume ended up essentially flat versus last year,” Chairman and Chief Executive Michael Ward said in a conference call.
Excluding items in the quarter and the year-earlier period, CSX’s earnings slipped to $109 million, or 50 cents a share, from $116 million, or 54 cents a share, a year earlier and missed analysts’ consensus earnings estimate by 3 cents.
Storms disrupted service and hurt revenue by $15 million to $25 million in the quarter, adding about $5 million to operating expenses, executives said.
“It was not bad, considering the position they were in before and the terrible weather,” said independent analyst Tony Hatch. “I was impressed with the yield story. I wish they had broken it down and said how much was due to change in mix, fuel surcharge and true pricing. But whatever it was, it’s clear pricing is pretty good.”
BETTER ECONOMY BOOSTS TRANSPORT DEMAND
The U.S. economic recovery and a surge in imports and exports is surpassing transportation supply, offering a favorable pricing climate, Ward said.
But CSX, whose stock was unchanged at $35.91 in mid-afternoon trading, was not able to benefit fully.
“Our network is not running to its potential and our resulting cost structure is way too high and service levels need to improve,” said Tony Ingram, chief operating officer, in the call, adding. “We’re moving in the right direction.”
CSX VS. OTHER RAILROADS
For the fourth quarter, Chief Financial Officer Oscar Munoz said during the call that CSX expects earnings, before a reduction of 2 cents a share related to the adoption of new convertible bond accounting, to approach analysts’ consensus estimate of 65 cents a share.
Contrasting CSX to other troubled railroads, Hatch said its ability to provide fourth-quarter guidance and visibility for the future offered some encouragement.
Kansas City Southern Industries Inc. (KSU.N: Quote, Profile, Research) said its third-quarter profit, after paying its preferred stock, rose to $8.9 million, or 14 cents a share, from $1 million, or 2 cents a share, a year ago amid nearly 12 percent growth in revenue and nearly 7 percent increase in volume.
The railroad company’s shares slipped 29 cents to $16.64.
RailAmerica Inc. (RRA.N: Quote, Profile, Research) swung to a third-quarter net loss and sharply reduced its fourth-quarter earnings outlook, citing higher fuel and casualty costs.
The short-line railroad operator, whose shares slid 10 percent to $11.27, reported earnings before charges that missed analysts’ consensus estimates by 2 cents a share.