CSX railroad expects modest 2014 profit growth but impact of severe winter will linger


OMAHA, Neb. – CSX railroad expects to deliver modest profit growth this year, but the impact of the severe winter will linger into the second quarter.

Officials with the railroad said on a conference call Wednesday that the improving economy and stronger domestic utility demand for coal will boost CSX’s earnings in the second half of this year and in 2015.

The Jacksonville, Fla.-based railroad had said Tuesday that the harsh winter disrupted shipments and contributed to a 14 per cent drop in its first-quarter profit even as it hauled 3 per cent more freight.

CSX’s results hint at what investors can expect from other transportation companies because they were all affected by the brutal winter, but they also suggest the economy continues growing steadily.

CSX Corp. stock declined more than 3 per cent to $27.36 in afternoon trading Wednesday.

The January-March quarter was more challenging because of the sustained cold and heavy snow that fell across much of the country, said Michael Ward, the railroad’s president, CEO and chairman, in an interview.

“It was one storm after another and cold in between,” Ward said.

CSX is still clearing a backlog of freight across its network and identifying areas that may need improvements in the future. Ward said the Chicago area’s cold, snowy winter was especially problematic because all the major freight railroads connect in Chicago and commuter trains use some of the same rails. There is already a long-term plan in place to improve rail traffic through Chicago.

CSX reported net income of $398 million, or 40 cents per share, in the quarter that ended on March 31. That’s down from $462 million, or 45 cents per share, a year ago. The railroad’s revenue grew 2 per cent to $3.01 billion.

Wall Street expected 39 cents per share of earnings on $2.99 billion revenue.

The number of carloads of chemicals, crops, lumber, coal, grain and containers of imported goods that railroads carry is an indicator of the economy’s health, and CSX said the picture is positive.

“We think the economy looks strong,” Ward said.

But CSX is sticking with the conservative profit forecast it announced in March when it backed away from predictions for double-digit growth.

Ward said CSX’s 2014 profit forecast is reasonable because of the significant weather expenses in the first quarter and because the railroad’s 2013 profit was helped by several one-time gains.

CSX Corp. operates more than 21,000 miles of track in 23 Eastern states and two Canadian provinces.

Union Pacific railroad is scheduled to release its quarterly earnings report Thursday, and Norfolk Southern will report earnings next Wednesday.


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