(The Associated Press circulated the following on July 16.)
NEW YORK — Railroad operator CSX Corp. reports earnings for the second quarter on Tuesday. The following is a summary of key developments and analyst opinion related to the period.
OVERVIEW: CSX Corp., which operates the largest rail system in the Eastern U.S., drew scrutiny early in the quarter from federal officials who found issues with the company’s tracks across the country, after a series of derailments involving its freight trains. The company later announced a $6.4 billion investment to improve tracks and equipment.
The company also announced a $1 billion stock repurchase during the quarter, in addition to a previous $3 billion buyback that extends through the end of 2008.
Jacksonville, Fla.-based CSX largely avoided weather problems that plagued the Midwest and sections of Canada, including heavy rain and flooding, and it led the “Big Six” railroad operators on service improvements including increasing train speeds and cutting dwell times.
But it was hampered by negative volumes which echoed across the freight sector, especially in the Eastern U.S.
CSX reported a more significant decline in total car volumes than in the previous quarter led by lowered intermodal, coal and grain volumes. And for the first time since the fourth quarter of 2000, seven out of eight rail segments experienced declining volumes. Strong auto volumes provided some relief.
BY THE NUMBERS: Analysts polled by Thomson Financial are expecting CSX to report earnings of 64 cents per share on revenue of $2.53 billion.
ANALYST TAKE: CSX should report financial results inline with expectations, according to Bear Stearns (nyse: BSC – news – people ) analyst Edward Wolfe. Generally, earnings from CSX are expected to be slightly better than other railroad operators as it reported stronger year-over-year volumes than its peers in the second quarter.
After two quarters of negative rail volumes, pricing has slipped, but still remains “extremely solid,” Wolfe said. He expects fuel prices to have little effect on railroad earnings.
WHATS AHEAD: Most analysts see a slight improvement in volumes in the third quarter, as weakness in the housing and industrial sector eases. Railroads will make up even more ground in the fourth quarter, analysts suggest, as growth in intermodal allows for notable improvement in volumes.
STOCK PERFORMANCE: Shares of CSX Corp. gained nearly 13 percent during the second quarter. So far this year, the stock has risen 39 percent.