CSX Railway Reports 11% Rise in First-Quarter Profits, Lowers Earnings Expectations

Researched by Industrial Info Resources (Sugar Land, Texas)--Eastern U.S. freight rail carrier CSX Corporation (NYSE:CSX) (Jacksonville, Florida) reported first-quarter net earnings of $442 million, up 11% from the same quarter last year, but lowered its earnings growth expectations for all of 2015. Revenue for the quarter ended March 27 was nearly flat at just more than $3 billion, as market growth and improved pricing were offset by the impact of low natural gas prices, lower fuel recoveries and the stronger U.S. dollar, the company said.

Industrial Info is tracking 42 active CSX projects with a cumulative investment value of $2.76 billion. This includes 22 projects, worth $1.5 billion, which are under construction; one project, valued at $50 million, which is in the engineering phase; and 19 projects, valued at more than $1.2 billion, which are in the planning phases, where plenty of factors could alter their timing or outcome.

With a total investment value of $122 million, CSX's 2015 statewide freight rail network upgrade and rehabilitation program for Ohio is the largest high-dollar project being tracked by Industrial Info. The project, which runs along the 4,000-mile rail system, includes work on five rail yards, four intermodal terminals, five TRANSFLO terminals and three automotive distribution centers.

Chief Financial Officer Fredrik Eliasson said during the company's earnings conference call that first-quarter revenue growth had slowed from the same quarter in 2014, when there was 2% growth. He said revenue for the just-ended quarter was impacted by a weaker coal market, the stronger U.S. dollar and winter weather conditions.

Coal shipment headwinds will continue, Eliasson said, with total domestic volume expected to be down at least 5% for all of 2015. He noted the railway has seen "significant headwinds" from falling coal shipments for three years.

First-quarter coal volumes shrank 1% to 289,000 rail units, CSX reported. Domestic utility coal volume decreased slightly as a result of lower natural gas prices and the resulting increase in natural gas-fired power generation, and higher overall coal stockpiles, the company reported. Metallurgical and thermal coal for export fell due to global market conditions, while domestic coke, iron ore and other volumes increased.

CSX now expects to see mid-to-high single-digit, earnings-per-share growth for 2015, Eliasson said, compared with previous expectations of double-digit growth for the year.

Company President Oscar Munoz said he anticipates the railway will begin to benefit from more locomotives on line during the second half of 2015. The company plans $2.5 billion in capital expenditures for the year.

Company executives said they also expect to see continued savings from lower fuel costs. Locomotive fuel prices decreased 41% in the first quarter and reduced expenses by $169 million.

Total merchandise volume for the quarter was 655,000 rail units, up 1% from the same quarter in 2014. Domestic volume increased nearly 9%, while international volume fell 7%.

The railway saw merchandise volume growth in agricultural products, chemicals, automotive products. Volumes shrank for phosphates and fertilizers, metals and forest products. Volumes were flat for food and consumer items, and waste and equipment.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 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.