(The following column by Mark Basch appeared on the Florida Times-Union website on October 12, 2009.)
JACKSONVILLE, Fla. — Earnings season starts this week for Jacksonville-based companies, with CSX Corp. the first to report its quarterly results on Tuesday. And while CSX’s numbers are expected to be lower than last year, things are looking up for the future as the economy rebounds.
J.P. Morgan analyst Thomas Wadewitz said in a research report last week that after spending several days with CSX management, he found them to be “generally upbeat.”
“Management showed clear enthusiasm for the company’s ability to control its costs as volumes improve, which should allow meaningful margin expansion,” he wrote.
Wadewitz predicts “CSX is likely to produce significant EPS growth in 2010 and 2011 if there is a meaningful turn in the economy which produces growth in railroad volumes.”
That sentiment is shared by many analysts. The average forecast of analysts surveyed by Thomson Financial calls for earnings per share (EPS) of 71 cents in the third quarter, down from 94 cents the previous year.
And the average forecast for all of 2009 calls for earnings of $2.69 a share, down from $3.51 in 2008. But the analysts project earnings to grow to $3.23 in 2010 and $3.92 in 2011.
Fourteen of 21 analysts following the company have the equivalent of “buy” ratings on the stock, including Wadewitz, who rates it as “overweight.”
“We continue to believe that CSX will be a good name to own in order to participate in a turn in the industrial economy,” he wrote.
But he did inject one note of caution, saying that weakness in coal volumes could affect earnings growth.
Transportation of coal is expected to account for 31 percent of CSX’s revenue this year, he said.
“If coal volumes fall again in 2010, it would likely make it difficult for CSX to realize strong EPS growth,” Wadewitz said.