CSX profits continue to suffer from coal decline

The Jacksonville, Fla.-based railway saw second quarter 2016 net earnings drop 19.5 percent to $445 million on revenues that fell 11.7 percent to $2.7 billion compared with the second quarter of 2015.    CSX Corporation’s profits in the second quarter of 2016 continued to suffer from a transitioning energy market that has moved away from commodities traditionally transported by rail like coal and crude oil.
   The Jacksonville, Fla.-based railway saw net earnings tumble 19.5 percent to $445 million in the second quarter compared with the same 2015 period, according to the company’s most recent financial statements.
   Earnings per share (EPS) dropped from $0.56 per share for the second quarter of 2015 to $0.45 per share in second quarter 2016. Revenues fell 11.7 percent year-over-year during the quarter of 2016 to $2.7 billion.
   The company’s overall rail volumes were down 9 percent from the previous year, led by an over 33.9 percent drop in coal volumes. Revenues from coal also dropped 33.9 percent, from $630 million in Q2 2015 to $416 million in Q2 2016.
   Intermodal volumes fell 4 percent from the same 2015 period, causing revenues from intermodal transport to slip 6.9 percent to $419 million.
   For the second quarter of 2016, CSX also posted year-over-year volume declines in the agricultural products (down 7.9 percent), phosphates and fertilizers (down 7.7 percent), food and consumer goods (down 4.2 percent), chemicals (down 12.7 percent), metals (down 8.2 percent), forest products (down 8.1 percent), and waste and equipment (down 2.4 percent) sectors.
   The railway only experienced year-over-year volume growth in the automotive and minerals sectors, up 0.8 percent and 13.1 percent, respectively.
   In addition to declining volumes, CSX attributed lower earnings and revenues to a strong U.S. dollar and low commodities prices, which more than offset pricing gains from an improving service product. The railways said it expects these factors to continue to “challenge financial performance” and to have a significant impact on its full year earnings in 2016.
   CSX’s expenses, however, fell 9 percent during the quarter to $749 billion, driven by efficiency gains of $96 million, along with lower volume-related costs of $86 million, and $56 million from lower fuel prices.
   Looking forward to the rest of 2016, CSX said it continues to expect full-year EPS to decline due to the ongoing transition in energy markets, and the impacts of the strong U.S. dollar and low commodity prices. The company posted full-year EPS of $2.00 per share in 2015.
   “CSX continued to drive strong customer service and network efficiency in a challenging market, which is expected to persist throughout this year,” Michael J. Ward, CSX chairman and chief executive officer, said of the second quarter results. “In this environment, the company continues to right-size resources while making strategic investments to transform the company and capitalize on market opportunities to drive long-term value creation.”
   Shares of CSX Corp. were up 2.2 percent, from $28.21 at close of business to $28.83 at noon in New York, after climbing as high as $29.19 in early morning trading.