CSX Earnings Down, Anticipates Stable 2017

Researched by Industrial Info Resources (Sugar Land, Texas)--Rail operator CSX Corporation (NASDAQ:CSX) (Jacksonville, Florida) reported net earnings of $458 million for the fourth quarter of 2016, compared to earnings of $466 million from the same quarter of the previous year. The company continues investing in infrastructure and anticipates moderate growth in markets in 2017, including export coal tonnage. Industrial Info is tracking more than $422 million in projects involving CSX.

In a conference call regarding the earnings, Chief Financial Officer Frank Lonegro said, "We expect volume to be flat to slightly up year over year in the first quarter, as the industrial economy is stabilizing and energy-related headwinds are moderating slightly. That said, a number of our markets are returning to year-over-year growth in the quarter as we cycle the challenging conditions of early 2016."

Lonegro said that export coal opportunities will continue to benefit from China's production cuts, driving increased demand for U.S. coal, although domestic coal tonnage shipments are expected to continue to trend downward. "The metallurgical benchmark has strengthened year over year, attracting increased production from U.S. coal producers entering 2017," said Lonegro. "We expect export tonnage in the [first] quarter to be about 8 million tons. For the full-year 2017, we expect export coal to be in the mid to high 20 million-ton range."

"Domestic coal is expected to be down, although we are seeing moderating inventory levels and slightly increased coal demand with winter weather," said Lonegro. "In short, we expect domestic coal to be around 15-16 million tons for the first quarter."

The company said that CSX's capital investment plan will decrease to $2.2 billion from $2.7 billion last year, which included strong locomotive purchases.

Among the CSX projects being tracked by Industrial Info is the $85 million intermodal terminal expansion in Memphis, Tennessee. The project consists of constructing a 95-acre intermodal railyard expansion to double the size of the existing facility and more than triple the current annual container throughput of 140,000 twenty-foot equivalent units. The project is expected to kick off in the first quarter of this year and be completed in summer 2018.

Also on the books is the anticipated $272.6 million intermodal rail terminal near Rocky Mount, North Carolina. When questioned about strategic capital investment, Lenegro used the Rocky Mount as an example of how capital investment will continue to grow. "You've heard us talk about the Central Carolina hub connector we're going to do outside Rocky Mount to serve the Mid-Atlantic and Southeast, so you'll see us to continue to invest in facilities like that to expand the terminal footprint and be able to increase the domestic business and domestic intermodal business that we believe is a big part of the growth for us longer term," said Lonegro.

The Rocky Mount project includes constructing a 550-acre intermodal rail terminal to become a major East Coast hub for containerized cargo that travels on ships, trains and trucks. The facility will handle 270,000 container moves per year. The project is expected to kick off in mid-2018 and take slightly less than two years to complete.

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