Aggressive · Stocks to Consider and Updates

CSX Reports Solid First Quarter Revenue and Earnings

  Jacksonville, Florida-based railroad CSX Corp. (NASDAQ: CSX – $46.93) announced first quarter 2017 net earnings of $362 million and excluding a $173 million restructuring charge, adjusted earnings per share of $0.51 as compared to $0.37 last year and eight cents better than consensus estimates. Revenue for the quarter increased 10% to $2.87 billion, reflecting volume growth across most markets, overall core pricing gains, increased fuel recovery and favorable mix. Wall Street was looking for revenue closer to $2.76 billion. The company was able to deliver strong efficiency savings of $123 million during the period and the new CEO – legendary railroader Hunter Harrison – is expected to provide more of the same in the years to come. Harrison went on to say: “I am pleased to join the CSX team and working together we are going to make this company the best North American railroad, capable of consistently meeting and exceeding the expectations of our customers and our shareholders. As the business environment continues to improve and we implement Precision Scheduled Railroading, CSX will realize these objectives while driving volume growth and achieving a new level of financial performance.”

       Looking ahead, CSX is making adjustments to improve asset utilization, achieve greater operations efficiency and reduce its cost structure. The company completed a program to renew the locomotive fleet last year, which will lower fuel consumption, equipment rents and other costs, as well as improve service. Headcount should also be down. The closely watched operating ratio came in below 70% on an adjusted basis for the quarter, better than expected. Management has a goal of improving (reducing) its operating ratio to the mid 60s in time from 70.4% last year. CSX has invested heavily on its intermodal network and agricultural and manufacturing traffic should also be positive this year. And coal volume should at least stabilize under the new administration in Washington. The shares, up 3% after hours, are no longer cheap by rail standards at 21 times estimated 2017 earnings, but long-term holdings should continue to pay off.

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