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Rail News: CSX Transportation

CSX scores revenue and income gains, sets third-quarter operating ratio record


Despite a time of “significant economic uncertainty,” CSX Corp. delivered “impressive” financial results in the third quarter, senior executives said during the Class I’s earnings conference this morning in Jacksonville, Fla. The primary reason: Manufacturers and distributors continue to view rail as the best ground transportation alternative and CSX is positioned to capitalize on that demand driver, said Chairman, President and Chief Executive Officer Michael Ward.

The company’s earnings from continuing operations totaled $382 million or 94 cents per share, up 40 percent compared with third-quarter 2007’s earnings. Operating income jumped 31 percent to a record $733 million and revenue increased 18 percent to about $3 billion.

Nine of CSX’s 10 market segments posted revenue gains despite ongoing softness in the housing and automotive sectors. Merchandise revenue increased 16 percent to $1.5 billion, coal revenue jumped 31 percent to $850 million (primarily because the export market remains strong and utilities’ stockpiles are below prior-year levels) and intermodal revenue rose 18 percent to $399 million, said Executive Vice President of Sales and Marketing Clarence Gooden. In addition, total revenue per unit increased 21 percent vs. third-quarter 2007’s level.

The automotive sector registered the only revenue drop, falling 2 percent to $195 million, because automakers have decreased production to match demand, said Gooden.

CSX is generating revenue growth for two main reasons: The railroad is setting rates based on the value it’s creating for customers and “our diverse business portfolio allows us to capitalize on some segments while others are experiencing weakness,” said Ward.

CSX also continued to lower its operating ratio, which improved 2.5 points to a third-quarter record 75.2. The Class I remains on its path of lowering the ratio to the high 60s by 2010, said Ward. Since 2005, the Class I has improved its third-quarter ratio by 8 points, from 83.2 to 75.2.

The only blemish on CSX’s third-quarter ledger is operating expenses, which rose 15 percent to $2.2 billion compared with third-quarter 2007 expenses. Excluding fuel costs — which soared up 54 percent to $508 million — operating expenses would have increased by 7 percent, said EVP and Chief Financial Officer Oscar Munoz.

Overall, CSX’s quarterly results show revenue and income growth are sustainable in a tough economic environment, senior execs said.

"CSX has momentum in our business and confidence in our ability to produce good results, even in periods of economic uncertainty," said Ward.

Jeff Stagl

Contact Progressive Railroading editorial staff.

More News from 10/15/2008