CSX Profit Beats Estimates as U.S. Utility Coal Volume Rises

CSX Corp. (CSX), the biggest railroad in the eastern U.S., reported second-quarter profit that topped analysts’ estimates as shipments of coal to domestic utilities climbed for the first time since 2010.

Net income rose 4.5 percent to $535 million, or 52 cents a share, from $512 million, or 49 cents, a year earlier, Jacksonville, Florida-based CSX said today in a statement. That beat the 47-cent average of 28 estimates compiled by Bloomberg.

CSX benefited as coal, its biggest cargo, regained favor as a fuel at U.S. power plants amid a climb in the price of natural gas. The company had beaten or matched profit expectations in 15 of the previous 17 quarters, according to data compiled by Bloomberg, as the economy strengthened and Chief Executive Officer Michael Ward boosted efficiency.

“Their increase in shipments of domestic utility coal might be the light at the end of tunnel for investors looking for this market to turn around,” Lee Klaskow, a Bloomberg Industries logistics analyst based in Skillman, New Jersey, said in an e-mail.

CSX said U.S. shipments of coal to utilities by tonnage increased 9 percent, the first quarterly gain since the final three months of 2010. Total coal volume fell 6.3 percent, narrowing from a 10 percent drop in the first quarter. Shipments of coal destined for export, primarily to Europe, declined.

Revenue Climbs

Sales rose 1.9 percent to $3.07 billion, exceeding the $3.03 billion average estimate. Total shipments rose 1 percent, including gains of 11 percent for chemicals such as crude oil, 8.9 percent for phosphates and fertilizers as a customer mine reopened and 7.1 percent for minerals such as stone and gravel as construction recovered, CSX said.

“The company has been outperforming our traffic growth assumptions,” a sign that second-quarter results would be solid, Jason Seidl, an analyst at Cowen & Co. in New York who rates CSX shares market perform, wrote in a note to clients before the announcement.

Operating ratio, an industry gauge of expenses to revenue, fell to 68.6 percent from 70.4 percent in the first quarter and 68.7 percent a year earlier. CSX in April pushed back a goal of lowering its ratio to 65 percent by 2015, in favor of a “high 60s” target with additional reductions later.

Profit per share this year will be “roughly flat” versus 2012, CSX said today. The company’s earlier forecast was for those earnings to be little changed to “slightly down.”

CSX rose 2.2 percent to $25.17 in extended trading at 6:10 p.m. in New York. Earlier, the shares closed at $24.64, an increase of 1.2 percent. They have gained 25 percent this year, as the Standard & Poor’s 500 Index advanced 18 percent.

To contact the reporter on this story: Tim Catts in New York at tcatts1@bloomberg.net.

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net.

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