Stocks jumped in the afternoon Thursday after investors' hopes that the U.S. may lift tariffs on China were boosted by a Wall Street Journal report. The Dow Jones Industrial Average (DJINDICES: ^DJI) and the S&P 500 (SNPINDEX: ^GSPC) both had healthy gains.
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Transportation stocks were leaders, with the SPDR S&P Transportation ETF (NYSEMKT: XTN) moving up 2%. The materials sector was also very strong; the SPDR S&P Metals and Mining ETF (NYSEMKT: XME) jumped 2.1%.
Two companies that investors look to for clues about the industrial economy reported earnings last night and today. CSX (NASDAQ: CSX) and PPG Industries (NYSE: PPG) gave mixed signals about 2019.
Image source: Getty Images.
CSX keeps chugging ahead
Railroad company CSX reported big gains in revenue and profit in the fourth quarter, thanks to rising volumes, price increases, and improved efficiency, but shares slipped 0.4%. Revenue increased 9.8% to $3.14 billion, slightly above Wall Street expectations, and adjusted earnings per share soared 58% to $1.01, beating the analyst consensus by $0.02.
Revenue gains came from a 3% increase in freight volume and 7% gain in revenue per unit. All freight categories had growing revenue except fertilizer, with double-digit gains in forest products, metals and equipment, minerals, automotive, and chemicals. Operating ratio, an efficiency measure, improved from 65.1% to 60.3%.
CSX officials were upbeat about this year, saying revenue growth won't be as strong as in 2018, but that the company is ahead of targets for efficiency improvement and cash generation. "While it's hard to ignore the volatility in equity markets, I cannot call out any trend in our business today that would point to a significant slowdown in our business," said CEO James Foote in the conference call.
PPG sees economic uncertainty, but improvement in the second half
Coatings specialist PPG turned in mixed results for the fourth quarter and cautioned about the economy in 2019, but shares rose 4.8%. Sales declined 1% to $3.65 billion, barely missing expectations, but grew about 2% in constant currency terms. Adjusted earnings per share from continuing operations fell 3.4% to $1.15, beating the analyst consensus of $1.10.
The performance coatings segment managed a 0.8% sales gain as growth in aerospace coatings made up for a decline in paint sales to retail do-it-yourself stores. Industrial coatings fell 3.4% due to weakness in automotive industry production, but industrial and specialty coatings grew sales by a low-single-digit percentage.
PPG, which has struggled to grow recently, gave cautious guidance for 2019, citing economic uncertainty, a slowdown in Chinese industrial production, weakening demand in Europe, and continuing input cost inflation. But the company also said it expected improvement in the second half, with auto production picking up, continued growth in aerospace, and some benefits from price increases and the company's restructuring efforts.
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