CSX ups Q4 EPS projection after November cut

Frank Lonegro, chief financial officer of the Class I railway, told investors and analysts at the Credit Suisse Industrials Conference the company has updated its fourth quarter earnings expectations to “flat to slightly up” from the previous year.    CSX Corp. has updated its earnings per share (EPS) projections for the fourth quarter of 2016 and is now expecting relatively stable profits compared with the same 2015 period, according to Chief Financial Officer Frank Longero.
   Longero told investors and analysts at the Credit Suisse 4th Annual Industrials Conference that a previously announced $0.08 impact to fourth quarter EPS from costs related to a near-term debt refinancing will now be offset by a recent property divestment.
   “We now expect fourth quarter earnings per share on a reported basis to be flat to slightly up, as macroeconomic headwinds impacting the company’s volume are moderating,” Lonegro said. “At the same time, a recent operating property sale will now offset the impact of a debt refinancing charge announced earlier in the quarter.”
   The Jacksonville, Fla.-based Class I railway said in a statement its overall volumes so far in the fourth quarter have fallen 3 percent, but declines in several segments have slowed compared with previous quarters. Volumes of coal in particular have begun to stabilize, with quarter-to-date carloads flat sequentially, according to CSX.
   Coal volumes have plummeted in the past 18 months across the rail industry amid stricter Environmental Protection Agency regulations and an abundance of cheap alternatives like natural gas, so comparisons to previous quarters will naturally be more favorable than year-over-year. Several industry analysts have predicted coal volumes will rebound slightly in early 2017, but this is still only by comparison to the abysmal first quarter of 2016.
   With macroeconomic headwinds moderating, Lonegro reiterated that CSX now expects total volumes to decline in the low-to-mid single digit range on a comparable 13-week basis, and to be flat to slightly up compared with last year, including the extra week in the company’s 2016 accounting year.
   Through a combination of ongoing network efficiency initiatives and volume-variable savings, CSX has delivered roughly $550 million in cost savings in the first nine months of 2016, according to Longero. He also reiterated CSX’s expectations for full-year 2016 efficiency savings of around $400 million, including about $100 million from structural changes in its coal network, $150 million from normal productivity initiatives, and the balance from key initiatives such as train length, which has increased 20 percent over the past two years.
   Third quarter 2016 profits at CSX fell 10 percent to $455 million ($0.48 per share) compared to the same 2015 period, according to the company’s most recent financial statements. Revenues for the quarter fell 8 percent year-over-year to $2.7 billion, consistent with an 8 percent decline in overall volumes, including a 21 percent drop in coal shipments.
   In terms of its long-term strategy, CSX said it is aiming to drive earnings growth and margin expansion, and continues to target a mid-60s operating ratio.