CSX says double-digit volume drop to continue in 3Q
(Dow Jones circulated the following story on July 14, 2009.)
JACKSONVILLE, Fla. CSX Corp. (CSX) said railroad freight volume likely will slide by a double- digit percentage rate in the third quarter, albeit not quite as steeply as the second quarter's 21% decline.
Executives of the Jacksonville, Fla.-based railroad said plunging year-over- year volume showed signs of "leveling" in the second quarter for the bulk of its markets.
"All and all, it looks to us that most of these markets are stabilizing.... barring any unforeseen circumstances," said Clarence Gooden, executive vice president of sales and marketing at CSX, speaking Tuesday on a post-earnings conference call.
A slump in coal shipments widened significantly, however, falling by 21% in the second quarter from a 7% first-quarter slump. CSX blamed the decline on reduced usage by electric utilities and lower natural gas prices, as well as on reduced coal exports due partly to lower steel production in Europe.
Gooden said the slide in coal volume will moderate a bit in the third quarter, although he stopped well short of predicting the trend will improve.
Meanwhile, CSX said it expects its planned increase in 2009 core prices, which don't include fuel surcharges, to exceed a previous forecast of 5% to 6% for the full year. The company said core prices climbed 6.6% in the second quarter and 6.5% in the first quarter, despite the steep slide in freight volume.
CSX said it has seen "some compression" in prices on new business where the railroad competes with truck and barge transport. But it said it generally has avoiding cutting prices merely to win business.
"We haven't sacrificed price overall to bring volume onto the railroad," Gooden said. "There's been some cases where we have just elected not to go after some new business."
As for 2010, Gooden said CSX is committed to a similar strategy. He said he expects 2010 core prices to exceed inflation.
CSX shares rose 5.9% to $34.46 in early trading Tuesday.
Late Monday, CSX reported second-quarter earnings of $308 million, or 78 cents a share, down from $385 million, or 93 cents a share, a year earlier. Excluding discontinued operations related to the struggling Greenbrier Resort, earnings fell to 72 cents a share from 95 cents a share.
Revenue fell 25% to $2.2 billion amid the 21% drop in volume.
Story updated at 9:34 AM on Wednesday, Jul. 15, 2009
CSX Corp. Chairman and CEO Michael Ward thinks weve seen the worst of the recession. But the head of the Jacksonville-based railroad company doesnt know when the recovery will begin.
As we read the tea leaves, it looks like it has bottomed, Ward said in an interview today.
What were seeing in most of the markets is pretty much a leveling out.
CSX late on Monday reported second-quarter earnings from continuing operations fell 24 percent to 72 cents a share, as the volume of freight carried on its railway fell 21 percent.
Because of the decline in volume, CSX has furloughed some of its rail workers until the economy improves. The number of workers on furlough rose from about 2,400 at the end of the first quarter to as many of 2,800 during the second quarter, Ward said. But about 200 of those workers did return during the quarter to replace retired employees and to fill in for others who are on vacation.
However, because of the uncertainty about when the economy will turn around, Ward cannot predict when the company will bring more of the workers back.
CSX's stock rose $2.26 to $34.80 Tuesday after the earnings report. Although earnings were lower than the 2008 second quarter, they were 10 cents higher than the average forecast of 62 cents a share by analysts surveyed by Thomson Financial.
CSX isnt making any predictions about third-quarter earnings, but analysts are forecasting earnings of between 59 cents and 80 cents a share, with an average forecast of 72 cents, according to Thomson.
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