(Bloomberg News circulated the following story by Angela Greiling Keane on October 14.)
NEW YORK CSX Corp.'s third-quarter profit fell 6.1 percent after a tax gain a year earlier and a drop in freight carried by the third-largest U.S. railroad in a slumping U.S. economy.
Net income dropped to $382 million from $407 million a year earlier, the Jacksonville, Florida-based company said today in a regulatory filing. Per-share earnings rose to 94 cents, more than analysts expected, from 91 cents because CSX reduced the amount of stock outstanding. Sales climbed 18 percent to $2.96 billion.
The railroad's profit declined for the first time in five quarters as the U.S. economy enters what may be the first recession since 2001. Its freight volume dipped 2.3 percent, led by a drop in automotive shipments. CSX is the first of the four biggest U.S. railroads to post results for the quarter.
``CSX has momentum in our business and confidence in our ability to produce good results, even in periods of economic uncertainty,'' Chief Executive Officer Michael Ward said in a statement.
In 2007's third quarter, CSX reported a tax gain of 24 cents a share related to previous asset sales. Excluding that gain, profit rose 29 percent from $297 million, or 67 cents, a year earlier, the company said.
Profit per share was more than the 92-cent average of 14 analyst estimates compiled by Bloomberg.
CSX said it expects full-year earnings at the ``low end'' of its previous forecast of $3.65 to $3.75 a share. The company also said it has ``strong liquidity, access to credit and expects free cash flow of approximately $1 billion in 2008.''
Automotive Decline
In this year's quarter, shipping volume fell most sharply in the automotive sector, with a 23 percent drop. That sector was the only one to report lower revenue, down 2 percent.
Other shipping categories with less freight included emerging markets, forest products and chemicals. Each of those still reported higher revenue than a year earlier, as revenue per unit, an indication of freight rates, increased. Total revenue per unit hauled climbed 21 percent.
Chemical shipping was damped by Hurricanes Gustav and Ike, which hit the U.S. Gulf of Mexico coast during the quarter.
CSX fell $1.73, or 3.5 percent, to $48.14 at 4:15 p.m. in New York Stock Exchange composite trading, before the earnings were released. The shares have gained 9.5 percent this year.
The Standard & Poor's railroad index, which includes CSX and three other companies, plummeted the most since 1989 on Oct. 2 on concern that falling factory orders and commodity prices may herald a drop in freight volume.
`Well-Positioned'
Dahlman Rose & Co. analyst Jason Seidl said the industry remains a good bet for next year.
``The rails are well-positioned to still grow earnings at a double-digit rate barring a deep recession/depression,'' he said in an Oct. 10 report to investors. ``Most of the railroads have 50 percent or more of their business already under contract at attractive rate increases for 2009.''
Seidl, based in New York, rates CSX shares ``buy.''
Union Pacific Corp. and Burlington Northern Santa Fe Corp., the two biggest U.S. railroads, are set to release earnings on Oct. 23. Norfolk Southern Corp., the fourth largest, plans to report on Oct. 21.
(CSX will discuss its results tomorrow at 8:30 a.m. New York time in a Webcast at http://www.csx.com in the investors section.)
