by Sarah Devin
Beacon Contributing Writer
CSX reported after the market bell earnings of 78 cents per share for the first quarter, nine cents more than the mean analysts’ estimate polled by Thomson Reuters. Revenue rose to $2.5 billion for the quarter, compared with consensus of $2.37 billion.
The nation’s third largest railroad cited �gradual and steady growth� in the U.S. economy as the catalyst for the better-than-expected results. Earnings rose 20 percent from last year’s first quarter when the world economy nearly collapsed into free fall.
The Jacksonville, Fla.-based company said it earned $306 million, compared with $254 million posted for the equivalent period last year.
Investors look to the rails for signs of domestic economic activity. The CSX report shows that the U.S. economy isn’t falling off a cliff, but it isn’t thriving either.
Though overall shipments rose during the quarter, the company said consumer-related freight and coal deliveries were weak. The company also said that building products shipments remained low as well. Coal shipments to utilities fell as well, as business demand for power is reduced. One of the the bright points in the data, however, is shipments of coal to China, which imports much of its coal to make steel.
CSX said shipments of automobiles spiked 64 percent, the most encouraging statistic in the data, as car and truck production in North America ramped up. During last year’s equivalent quarter, General Motors was on the brink of bankruptcy following plunging sales and record losses.
Following the report, FBR Research reiterated an ‘Outperform’ rating on CSX, raising its target price for the stock to a range of $63 and $66.
The FBR analyst said, “We believe the company’s results are a strong start to rail earnings season and would expect solid results from the rest of the names in the group, particularly Union Pacific, which has outperformed on volume growth, and Norfolk Southern, which should also benefit from export coal volumes.”
FBR also increased its fiscal 2010 and 2011 estimates by 6 percent and 4 percent, respectively.
The FBR analyst said, “We are increasing our 2010 and 2011 EPS estimates by 6% and 4%, to $3.45 and $4.10, from $3.25 and $3.95, respectively.”
By Mike Bogan
Beacon Contributing Writer
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