Railroad transporter CSX Corp. (CSX), Tuesday reported an increase in second-quarter profit, driven mainly by lower expenses. Earnings for the quarter topped analysts' estimates, but revenues fell short of expectations, hurt by decline in utility coal shipments.
Revenues for the quarter edged down slightly year-over-year, despite growth in merchandise and intermodal divisions, impacted mainly by lower domestic utility coal demand. Results of railroad transporters are a vital indicator of the buoyancy of an economy.
Coal transportation by railroads to power plants and steel makers have declined in 2012, after coal prices dropped significantly as warmer winters reduced the demand for electricity. Moves from regulators to control emissions from burning of coal and shifting to cheaper natural gas by power plants and steel makers have also impacted the coal industry.
Coal segment revenues slipped 14 percent, hurt mainly by a 14 percent decline in volumes, reflecting low natural gas prices and utility stockpiles. Revenue per unit remained almost flat at $2,477.
At merchandise segment, which includes agricultural, industrial, and housing and construction, revenues advanced 6 percent from last year. Volumes were up 1 percent, helped mainly by growth in automotive. Revenue per unit at the segment grew 6 percent to $2,516.
Intermodal segment revenue climbed 10 percent, with volumes up 8 percent, driven mainly by new customers. Revenue per unit totaled $649, up 2 percent from the prior year. This segment involves the transportation of freight in containers multiple modes of transportation.
Revenue for the second quarter was $3.012 billion, compared to $3.019 billion last year. Analysts on a consensus expected revenues of $3.05 billion for the quarter.
Expenses for the quarter dropped to $2.069 billion from $2.093 billion last year, helped mainly by lower labor and fringe expenses as well as lower fuels costs. Cost efficiencies led to 60 basis point improvement in operating ratio, reported at 68.7 percent.
Jacksonville, Florida-based CSX's net income for the second quarter improved to $512 million or $0.49 per share from $506 million or $0.46 per share last year. On average, 26 analysts polled by Thomson Reuters expected earnings of $0.47 per share for the quarter.
Commenting on the second-quarter results, CSX Chief Executive Michael Ward said, "CSX delivered its 10th straight quarter of year-over-year earnings growth despite significant headwinds in its utility coal business. The company continues to perform well across a wide range of economic and market conditions."
Moving ahead, CSX said it remains on track for earnings growth for the full-year 2012, despite challenges faced by utility coal market.
CSX closed Tuesday at $22.79, up $0.20 or 0.89%, on a volume of 7 million shares on the NYSE. In after hours, the stock rose $0.21 or 0.92%.
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