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A more diversified business portfolio that relies on merchandise and intermodal traffic to generate revenue rather than coal volume helped CSX Corp. post relatively strong third-quarter financial results.Revenue rose 4 percent to $3 billion, net earnings increased 2 percent to $463 million, earnings per share (EPS) ratcheted up 5 percent to 46 cents and volume climbed 3 percent to 1.64 million units, while operating income remained flat at $854 million compared with third-quarter 2012 results. Analysts polled by Thomson Reuters had anticipated EPS of 43 cents and revenue of $2.95 billion.The Class I now generates three-quarters of its revenue from merchandise and intermodal business — a positive trend since the railroad has logged a $750 million coal revenue loss since the start of 2012. In 3Q, coal revenue dropped 9 percent to $720 million and volume declined 7 percent to 299,000 units primarily because of weak domestic coal traffic, which fell 10 percent."CSX posted historically high financial results as it continued to effectively manage ongoing challenges in the coal market and leverage growth opportunities in merchandise and intermodal," said Chairman, President and Chief Executive Officer Michael Ward during an earnings conference held this morning, adding that the "diversity and vibrancy" of the Class I's portfolio is helping the railroad tackle market factors it controls the most.Merchandise revenue rose 7 percent to $1.7 billion and volume increased 5 percent to 687,000 units, with the chemical sector — namely crude oil, frac sand and liquified natural gas volumes — the key driver, said Executive Vice President of Sales and Marketing Clarence Gooden. Intermodal revenue climbed 8 percent to $431 million and volume rose 6 percent to a quarterly record 657,000 units because of highway conversions, core pricing gains and traffic moving in corridors that now are 90 percent double-stack cleared, he said.However, there are a couple of other negative things on CSX's 3Q ledger in addition to coal business: the operating ratio increased by 1 point to 71.5 and operating expenses rose 5 percent to $2.1 billion. Materials, supplies and other costs climbed 10 percent to $576 million, labor and fringe costs increased 5 percent to $791 million and fuel costs rose 3 percent to $407 million. Headcount, which was flat at 31,300 compared with the second quarter but down from third-quarter 2012's 32,200, is expected to remain relatively flat in the fourth quarter, said EVP and Chief Financial Officer Fredrik Eliasson.For the full year, CSX execs anticipate EPS to rise slightly from 2012's $1.79, the operating ratio to remain strong and efficiency savings to total $150 million. Longer term, the railroad is targeting EPS growth of 10 percent to 15 percent for 2014 and 2015, and a high-60s operating ratio by 2015 as well as a mid-60s ratio in subsequent years.— Jeff StaglEditor's note: For more information on CSX's efforts to diversify its business portfolio, follow this link to read the cover story in Progressive Railroading's October issue.