Shares of CSX Corp. (NYSE: CSX – $75.89) are advancing about 4% after hours following its report of first quarter profits that topped Wall Street’s expectations. The Jacksonville, Florida-based east coast rail and intermodal carrier said that a combination of cost reductions and price increases pushed earnings higher. Net profit was $834 million, or $1.02 per share, up from $695 million, or $0.78 a year earlier and eleven cents higher that consensus estimates. CSX’s operating ratio, a measure of operating expenses as a percentage of revenue and a closely watched gauge of railroad performance, was 59.5% versus 63.7% in the year-ago quarter. Revenue – in line with Street expectations – increased 5% over the prior year to $3.01 billion, driven by merchandise volume growth and stronger prices. The top line was boosted by transporting coal and merchandise (led by food products, agriculture and forest products), which was offset by some weakness in fertilizer and the company’s intermodal operations. For the full year, CSX reiterated its outlook of low-single-digit percent revenue growth and said it still expects its operating ratio to fall below 60% for the full year. Following today’s report, 2019 earnings could reach $4.34 per share compared to last year’s $3.82, valuing the stock at 18 times.
CSX should continue to benefit from its expense-cutting plans. The railroad has made great strides in service and lowered its cost structure. The company is currently in the process of retooling the intermodal business and rationalizing certain parts of the network. The shares – reaching a new record high in extended trading – have room to grow and the annual $.96 per share dividend yields 1.3%.