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CSX Q2 Earnings Top Estimates on Lower Costs & Solid Pricing

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CSX Q2 Earnings Top Estimates on Lower Costs & Solid Pricing

Low operating expenses and solid pricing gains across all major markets aid CSX's Q2 results.

CSX Corporation CSX reported better-than-expected results in the second quarter of 2018. The company’s earnings per share of $1.01 beat the Zacks Consensus Estimate of 86 cents. Moreover, the bottom line surged 57.8% year over year owing to lower costs and a reduced tax rate.

Also, revenues of $3,102 million surpassed the Zacks Consensus Estimate of $2,988.1 million and increased 5.8% year over year. Results were driven by 2% rise in volumes, higher fuel recoveries and strong core pricing gains across all major markets.

The bottom and top-line beat and the year-over-year improvements pleased investors. As a result, shares of the company were up 3.2% in after-hours trading on Jul 17.

Second-quarter operating income (on a reported basis) improved 34% year over year to $1,283 million. As the operating ratio (operating expenses as a percentage of revenues) on a reported basis improved to 58.6% from 67.4% in the prior-year quarter, operating expenses decreased 8% from the year-ago period. A cut down on workforce, crew starts and the active locomotive fleet due to implementation of the precision scheduled railroading contributed to the decline in expenses.

On an adjusted basis, operating income increased 20% year over year while operating ratio improved 490 basis points.

The company has raised its full-year guidance for revenues from up slightly to up mid-single digits, hoping that export coal strength will be consistent among other factors.

CSX Corporation Price, Consensus and EPS Surprise

 

CSX Corporation Price, Consensus and EPS Surprise | CSX Corporation Quote


Segmental Performance

Merchandise revenues climbed 6% year over year to $1,907 million in the quarter under review. However, merchandise volumes slipped 1% year over year.

Coal revenues expanded 7% year over year to $569 million in the reported quarter. Coal volumes also grew 7% year over year.

Intermodal revenues rose 9% year over year to $490 million. On a year-over-year basis, volumes inched up 2%.

Other revenues grossed $136 million, down 13% year over year.

Liquidity

CSX exited the second quarter with cash and cash equivalents of $1,320 million compared with $401 million at the end of 2017. Long-term debt totaled $13,769 million compared with $11,790 million at 2017-end.

For the period ending Jun 30, 2018, net cash provided by operating activities was $2,009 million compared with $1,566 million in the year-ago period.

Zacks Rank & Other Key Picks

CSX carries a Zacks Rank #2 (Buy). Some other top-ranked stocks in the broader Transportation sector are Expeditors International of Washington, Inc. EXPD, Atlas Air Worldwide Holdings AAWW and Knight-Swift Transportation Holdings Inc. KNX. While Atlas Air Worldwide sports a Zacks Rank #1 (Strong Buy), Expeditors and Knight-Swift hold a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Expeditors, Atlas Air Worldwide and Knight-Swift have gained more than 22%, 18% and 4%, respectively, in a year.

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