Aggressive · Stocks to Consider and Updates

CSX Misses Expectations on Top and Bottom Lines; Trims Outlook

East coast rail and intermodal carrier CSX Corp. (NASDAQ: CSX – $79.56) announced second quarter earnings of $870 million, or $1.08 per share, versus $877 million, or $1.01 per share in the same period last year; an earnings per share increase of 7%. The Street, however, was anticipating earnings of $1.11. CSX’s operating ratio set a company second quarter record of 57.4 percent, improved from 58.6 percent in the prior year. Revenue for the period declined by 1% over the prior year to $3.06 billion, as merchandise growth was offset by intermodal weakness. Here again, consensus was predicting revenue of $3.14 billion. Expenses decreased 3% year-over-year to $1.76 billion, driven by continued efficiency gains and volume-related savings. This combination yielded operating income growth of 2% for the quarter to $1.31 billion compared to $1.28 billion in the same period last year.

       CSX cut its revenue outlook for the year, on greater economic uncertainty and a recent shutdown of a customer that will hurt its crude-by-rail shipments. The railroad now projects revenue falling up to 2% this year, from a prior forecast of a low-single-digit percentage gain. Shares are falling about 5% in after-hours trading on the news. The shares had been up 21% over the past 52-weeks, but trade-related weakness may continue for the next few quarters putting pressure on the stock. The outlook for the Jacksonville, Florida-based company should bounce back once the economy returns to stronger growth and trade tensions ease. Positions can continue to be held in a well-diversified aggressive account for the long run.

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