CSX Corp., the largest East Coast rail carrier, raised its dividend and started a $1 billion share-buyback program after first-quarter earnings topped analysts’ estimates.
CSX boosted the quarterly payout by 1 cent, to 15 cents a share, payable June 14 to stockholders as of May 31. The repurchases start immediately, and Jacksonville, Florida-based CSX said it expects to complete them within the next two years.
Net income rose to $459 million, or 45 cents a share, surpassing the 40-cent average estimate of 28 analysts, even as sales slipped. Profit a year earlier was $449 million, or 43 cents. Shipments of chemicals, phosphates and fertilizers accelerated in the three months, helping to offset a fifth straight drop in revenue from hauling coal.
CSX pushed back a goal of lowering its operating ratio, an industry benchmark that compares expenses to sales, to 65 percent by 2015, which it had outlined as recently as six months ago. The railroad said today that it’s now targeting a “high 60s” ratio by 2015, and remains focused on a “mid-60s” target “longer term.” The ratio improved to 70.4 percent in the first quarter from 71.1 percent a year earlier.
“We continue to like the rails, particularly the East Coast names,” Peter Nesvold, a Jefferies Group Inc. analyst who has a buy rating on the stock, wrote in a note to clients before first-quarter results were announced. “We’d highlight CSX as a top pick.”
Per-share earnings will probably climb by 10 percent to 15 percent annually through 2015 from the 2013 base, which will be “flat to down” from prior-year levels, CSX said.
First-quarter revenue slipped to $2.96 billion from $2.97 billion a year earlier, the company said in its statement. That exceeded an average analyst estimate of $2.92 billion. Pricing gained “in nearly all markets,” CSX said without being more specific.
CSX fell 1 percent to $23.84 in extended trading at 5:39 p.m. in New York. Earlier, the shares closed with a gain of 2.9 percent to $24.14 on the New York Stock Exchange for an increase this year of 22 percent, as the Standard & Poor’s 500 Index climbed 10 percent.