CSX Corporation (CSX, Financial) announced third-quarter revenue of $3.2 billion, an increase of 8 percent from the same period last year and beating the average analyst’s estimate of $3.15 billion, according to Bloomberg.
CSX reported third quarter net earnings of $509 million, or $0.51 per share, an increase from net earnings of $455 million, or $0.45 per share, during the third quarter last year. Net earnings also exceeded the average of 23 analyst’s earnings estimate of 48 cents a share. Further, CSX forecasts to deliver nearly 10 percent of net earnings growth for next year.
Making steady progress
CSX reported 7% increase in total volume to over 1.75 million loads for the quarter with robust growth in coal, intermodal and merchandise.
There was solid increase in total merchandise revenue for the quarter, expanding nearly 12%. The agricultural sector volume increased 7%. Feed grain supply benefited hugely from the robust harvest in 2013 and ethanol supply expanded owing to reduced corn prices and thus leading to superior ethanol production levels. The overall construction segment expanded 5% depicting the significant recovery in progress for construction and house building activities. At last, the industrial sector rose 13% due to solid development in the energy-linked commodities such as frac sand, liquefied petroleum gas and crude oil.
From the above discussion, CSX seems to be very well placed to deliver healthy revenue growth and thus enhanced shareholder returns, going forward.
The intermodal business of CSX also illustrated excellent growth performance with total volume increasing 5%, marking a fresh record for the quarter and revenue expanding by 6%. Domestic volume increased 7%, accelerated by ongoing highway to rail conversions and international volume increased 3%, illustrating an expanding economy. Therefore, CSX continue to expand its international business by offering additional new services and executing upon key strategic investments. CSX estimates to open its new terminal outside of Montreal coupled with concluding the development of its Northwest Ohio hub by the end of fourth quarter.
CSX announced 7% increase in coal volume with constant revenue for the quarter. Domestic coal volume enhanced 14% with expansion in both northern and southern utility supplies. The coal tonnage for export reduced 13% as global market conditions for both thermal and metallurgical coals remain solid. In addition, total merchandise volume grew by 6%.
The accelerated pace of highway to rail conversions coupled with a significant increase in the international volume and enhanced coal volumes is believed to open entirely new growth dimensions for CSX.
In addition, CSX has provided the outlook for the fourth quarter. Moving ahead, it estimates a healthy demand scenario during the fourth quarter with steady to growing conditions for 96% of its markets and declining picture for the rest 4%. In detail, chemicals look healthy with several growth opportunities developed through the expansion of gas and domestic oil industries. In metals, there’s solid increase in production during the third quarter and this positive trend is forecasted to continue with rising demand in both energy and automotive markets.
On a year-over-year basis, CSX has added more than 400 active rail units. CSX has also entered into a contract to purchase 300 innovative locomotives for the coming several years with deliveries expected to start in the early first half of 2015.
Conclusion
Also, CSX strategic network investments are believed to enable accelerated highway to rail conversions with robust intermodal growth. The domestic coal volume is expected to grow significantly in the fourth quarter with the utilities progressing successfully on rebuilding inventories.
