(The Associated Press circulated the following article on July 27.)
WASHINGTON — Railroad companies CSX Corp. and Norfolk Southern Corp. reported much higher second-quarter earnings Wednesday as the growing economy spurred the need to ship coal and merchandise.
Both railroads said the increased transportation revenues for coal, which is used to fuel power plants and to make steel, and products such as construction materials offset rising diesel and labor costs.
”Near term, we expect the economy will continue to grow although at a slower rate than the nation has seen in the past several quarters. Meanwhile, the pricing of our market remains strong and our team will continue to drive yield improvement,” said Michael J. Ward, CSX’s chairman, president and chief executive.
”The recent forecast for continued economic growth and positive reports about the rebound of the manufacturing economy, as well as the projected 10 percent growth in international trade, is encouraging for the second half of 2005,” said Ike Prillaman, Norfolk Southern’s vice chairman.
CSX, based in Jacksonville, Fla., said second-quarter earnings rose more than 38 percent to $165 million, or 73 cents a share, up from $119 million, or 53 cents a share, a year ago. Excluding one-time expenses and benefits, earnings were 96 cents a share, above the average estimate of 81 cents a share expected by analysts surveyed by Thomson Financial.
The owner of the largest railroad in the eastern United States said revenues at its core surface transportation business were $2.17 billion, up about 8 percent from $2 billion a year earlier. The strength was led by the coal and merchandise shipping markets.
Merchandise revenues were $1.06 billion, up 7 percent from $991 million, and coal, coke and iron ore revenues were $541 million, up 22 percent from $442 million. Intermodal revenues were $330 million, up 2 percent from $325 million.
”With U.S. consumption increasing and more and more demand being met by imports, these must be carried long distances across the country. Our rail network is well positioned to make these deliveries into some of the most heavily populated areas of the country,” Ward told analysts in a conference call.
The company also repurchased $1 billion of its debt in the quarter to strengthen its balance sheet and reduce interest expenses. This caused an after-tax expense of $123 million, or 54 cents a share, which was partially offset by an income tax benefit of $71 million, or 31 cents a share, because of a change in Ohio corporate tax laws.
Norfolk Southern, based in Norfolk, Va., reported profits nearly doubled in the quarter to $424 million, or $1.04 per share, compared to $213 million, or 54 cents per share, in a year ago. The quarter included a $96 million gain related to Ohio phasing out its corporate franchise tax, as well as an extra $24 million for the settlements of two coal rate cases.
Excluding those items, net income still set a record for any quarter before accounting changes, at $304 million, or 75 cents per share. That figure exceeded estimates by analysts surveyed by Thomson Financial, who were looking for the company to post earnings of 65 cents per share in the quarter.
Operating revenue rose 19 percent to $2.15 billion in the quarter from $1.81 billion. General merchandise revenue rose 12 percent to a record $1.15 billion in the quarter. Coal revenue increased 36 percent to $578 million. Intermodal revenue rose 18 percent to $428 million in the second quarter.
CSX shares rose 15 cents to close at $45.60 on Wednesday on the New York Stock Exchange, just below their 52-week high of $45.90. Shares of Norfolk Southern rose $1.57, or 4.6 percent, to close at $36.10 on the NYSE, approaching their 52-week high of $38.99.
CSX provides rail, intermodal and rail-to-truck services. Its principal company, CSX Transportation Inc., operates a 21,000-mile rail network linking commercial markets in 23 states, the District of Columbia and two Canadian Provinces.
Norfolk Southern provides similar services. Its Norfolk Southern Railway subsidiary operates a 21,300-mile network in 22 states, the District of Columbia and Canada.