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Rail News: CSX Transportation

CSX bends, but doesn't break from coal and intermodal sector headwinds


Despite weak domestic coal traffic and flat intermodal volume in the fourth quarter, CSX Corp. registered top-line growth and set an earnings per share record primarily because of strong core pricing, high productivity and more fluid operations, senior executives said this morning during an earnings webcast and teleconference.

Fourth-quarter revenue rose 5 percent to $2.95 billion, net earnings increased 8 percent to $457 million, earnings per share climbed 13 percent to a record 43 cents and volume inched up 1 percent to 1.6 million units compared with fourth-quarter 2010, which included an extra week, senior execs said. Operating income dipped 1 percent to $841 million and the operating ratio increased 1.5 points to 71.5.

Merchandise business propelled revenue and volume growth, driven by strong demand for fertilizers, metals, autos and aggregates, said Executive Vice President of Sales and Marketing Clarence Gooden. Merchandise revenue rose 11 percent to $1.6 billion and traffic increased 5 percent to 666,000 units. Intermodal volume was flat at 579,000 units but revenue climbed 13 percent to $375 million primarily because revenue per unit rose 14 percent to $648, said Gooden. Record domestic intermodal volume helped offset weak international traffic. Coal revenue rose 13 percent to $915 million even though volume fell 3 percent to 374,000 units as revenue per unit jumped 17 percent to $2,447. Domestic volume was weak, dropping 10 percent, but export coal traffic was strong, driven by solid demand in Europe, Asia and South America, said Gooden.

Fourth-quarter operating expenses rose 7 percent to $2.1 billion primarily because of fuel costs, which climbed 22 percent to $423 million, said Oscar Munoz, who was just named EVP and chief operating officer. The average price of diesel rose from $2.42 per gallon in fourth-quarter 2010 to $3.05 per gallon in the prior quarter. Labor and fringe expenses were flat at $779 million even though headcount rose 6 percent to 32,139.

For the full year, CSX set four financial records: revenue, at $11.7 billion (up 10 percent); operating income, at $3.4 billion (up 11 percent); earnings per share, at $1.67 (up 24 percent); and operating ratio, at 70.9 (a 0.2-point improvement). Excluding the impact of higher fuel costs, the full-year operating ratio would have been 69.8, said Munoz. Operating expenses rose 10 percent to $8.3 billion.

Looking ahead, projected strong volume growth and minimal resource additions will mean more financial improvements in 2012, said Munoz. CSX also remains on track to achieve a 65 operating ratio by 2015, he said.

Munoz also announced that CSX’s capital spending budget in 2012 is projected to total $2.25 billion in 2012. Capex totaled $2.2 billion last year after the Class I’s board approved adding $200 million to the budget in July 2011. This year’s investments again will be targeted at infrastructure and equipment, including locomotive and freight-car acquisitions, and positive train control work, said Munoz.

Jeff Stagl

Contact Progressive Railroading editorial staff.

More News from 1/24/2012