CSX Corporation (CSX) Q1 Earnings Might Feel The Winter Chill

CSX Corporation (CSX) Q1 Earnings Might Feel The Winter Chill

CSX Corporation (NYSE:CSX) is all set to report its first quarter 2014 earnings on April 16, 2014, which are expected to be weak due to higher operating cost owing to a severe winter. The company stated that the downside in volume and revenue can be improved in the future quarters. For the full year, growth in earnings per share is expected to be moderate compared to the company’s guidance of 10-15%.

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Mixed performance from coal segment

Coal shipments that were at a low level throughout 2012 and 2013 due to growing popularity of natural gas and overhanging coal inventories may also be recover this quarter. Other segments including chemicals, intermodal, agriculture and automobile shipments would continue to drive growth in volumes. Export coal shipments and construction material shipment are expected to be low.

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CSX Corporation (NYSE:CSX) could earn profit from 50% of its domestic coal business if the price of natural gas remains above $3.50. Domestic business includes coal sourced from the Powder River Basin and the Illinois Basin.

Export coal shipments are still a risk for CSX Corporation (NYSE:CSX) as in the first nine weeks of the first quarter, the shipment dropped 16% in the wake of competition from Australian coal, which affected the global export share of U.S. coal.

Operational cost for CSX expected to rise

Equipment and other rental expenses dropped 2% in the previous quarter and the average cost of fuel dropped 7%. In 2014, the equipment and other rental expenses are expected to increase with the surge in locomotive. Operational cost for CSX Corporation (NYSE:CSX)  would rise, and, as a result operating ratio of the company would also be impacted. CSX expects to achieve the operating ratio of high 60s by 2015 even though the cost will be higher in the first quarter.

In the last quarter of 2013, revenue for CSX Corporation (NYSE:CSX) surged 5% to $3 billion backed primarily by increased revenue and volume of intermodal and merchandise shipments. Net earnings for the company came in low at 5%, which resulted in a decline of 2 cents in earnings per share. It was primarily due to the impact of an after-tax real estate gain, in the last quarter of 2012. The company’s operating expenses surged 1.4%, when expressed as a percentage of revenue, to reach 73.2%.

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Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at amanjain@valuewalk.com
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