Jacksonville, Florida-based CSX Corp. (NYSE: CSX – $70.70) reported a quarterly profit that topped Wall Street estimates as cost cuts helped the east coast railroad offset lower volumes of shipment in its coal and intermodal units. Revenue fell 4.8% to $2.98 billion in the quarter and slightly below consensus views. Sales in the company’s intermodal unit – which moves cargo using multiple modes of transportation – slipped 10.6%. Net income fell 4.3% to $856 million, or $1.08 per share, compared to $1.05 last year. Analysts on average had expected CSX to post earnings of $1.01 per share.
Shares are moving higher on the news by about 2 ½ percent as traders were worried that weaker traffic would translate into lower profits. However, the company’s operating ratio fell to 56.8% in the third quarter from 58.7% a year ago. A lower operating ratio means improved profits for railroads. Costs fell 8% to $1.69 billion in the third quarter, driven partly by lower fuel prices. Results come as U.S. President Donald Trump’s ongoing trade war with Beijing has pushed rail freight volumes lower this year and worries of freight recession have plagued the U.S. transportation industry. On a relative basis, CSX is now trading at a more reasonable premium to its peer group providing for a more favorable entry point. In addition, the company’s long-term total return potential remains intact. The dividend – yielding 1.4% – has increased 8.5% per year over the past five years and should continue to rise commensurate with increasing cash flow.