CSX Switches Coal For Shale Oil And Gas, Tops Profit Estimate And Raises Dividend
CSX continues to move forward:
CSX, the large railroad transportation company, posted first quarter earnings after the bell on Tuesday, beating profit and revenue estimates despite a weak coal market. The company increased its dividend and introduced a new share buyback program, as management highlighted their capacity to withstand difficult market conditions.
Net income for the East Coast railroad firm rose 2.2% to $459 million in the first quarter. In a per share basis, CSX beat consensus estimates by a nickel, earning 45 cents.
Revenue ticked down to $2.96 billion, narrowly beating the $2.94 billion estimate. CSX’s earnings serve as a proxy aggregate demand, giving investor a peak into transports of agricultural, industrial, and construction products, as well as coal.
Overall merchandise revenues slid 1% as agricultural products, metals, and waste and equipment shipments fell. Chemicals were up on the back of increased volumes of energy related products, in great part due to the shale revolution. Despite major Detroit automakers like GM and Ford hitting multi-year highs in shipments, auto volumes came in flat. Coal revenues declined 10% on the back of a weak market and cheap natural gas prices, as shares in companies in the sector including Peabody energy have taken a beating.
CSX’s operating ratio fell 170 basis points to 70.4% sequentially. CSX increased its quarterly dividend 7% to 15 cents per share, while management announced a new share buyback program worth $1 billion. The company expects to see its operating ratio to be around the high 60s by 2015, while average annual EPS growth should average between 10% and 15% off of their 2013 base.