CSX Detours Around Weak Coal Market to Post Gains in Third-Quarter 2014, Sees Improvement in Coming Months

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Researched by Industrial Info Resources (Sugar Land, Texas)--Leading U.S. rail operator CSX Corporation (NYSE:CSX) (Jacksonville, Florida) reported mostly positive results for second-quarter 2013, as strong volumes and pricing gains in the Merchandise and Intermodal segments more than offset a continuing drop in Coal segment volumes. Net earnings were reported to be $463 million, a 1.76% increase from the third quarter of 2012.

Total revenues stood at $3 billion, a 3.63% increase from the same period last year. As in previous quarters, the coal market proved weak as lower U.S. electrical generation resulted in a decline in domestic coal shipments; the export market also saw decreased shipments due to weak coal prices and global oversupply. However, an increase in energy-related shipments, including low-cost crude oil from shale drilling, boosted the Chemicals business, while stronger domestic steel production and modal conversions benefited the Metals business. An improving home construction market led to an increase in cement and building product shipments.

Industrial Info is tracking more than $3 billion in active projects involving CSX, including $95 million in improvements to an intermodal terminal in Jacksonville, Florida. The project is part of a plan to upgrade and rehabilitate the 2,800-mile, state-wide freight rail system, including three rail yards, three intermodal terminal, four TRANSFLO terminals, and four automotive distribution centers. Industrial Info also is tracking $85 million in improvements to a terminal in Louisville, Kentucky, which is part of a plan to overhaul the state's 2,900-mile system, including two rail yards, an intermodal terminal, two TRANSFLO terminals, and an automotive distribution center.

"[Intermodal segment] domestic volume was up nearly 9%, setting a new quarterly CSX record, driven by growth with our existing customers and continued highway-to-rail conversions," said Clarence Gooden, the executive vice president of sales and marketing for CSX, in a conference call. "International volume was up 3% as growth with international customers and from new service offerings more than offset volume losses from carrier port shifts. Total Intermodal revenue increase 2% on core pricing gains.

Among the positive trends that CSX executives expect to continue in the final quarter of the year are the strong demand in energy-related markets; the growth in steel production; and the recovery in the domestic home construction market. The Agricultural Products segment, which suffered from lower third-quarter exports of feed grain and ethanol, is expected to see record corn crop-related shipments, driving volume growth in the segment into the mid-teens. However, high stockpiles and low natural gas prices are likely to continue to weaken the domestic coal business, while high domestic supply and low international demand will prove detrimental to the Phosphates & Fertilizers business.

"We expect stable-to-favorable conditions for 79% of our markets, and the overall volume outlook for the fourth quarter is positive," Gooden said in the conference call. "Export coal is expected to grow slightly, despite soft global market conditions, as we are cycling weaker comparisons to last year's fourth quarter. That said, pricing levels will be lower as we continue to focus on keeping U.S. coal competitive globally."

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Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and nine international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.