- Railroad says weakness in freight shipping to continue in 2016
- Cost cuts help company beat fourth-quarter earnings estimates
CSX Corp. said earnings per share will probably decline in 2016 as a drop in coal freight continues to drag down the industry’s results.
The largest rail carrier in the eastern U.S. expects “negative global and industrial market trends” to weigh on profits this year, it said in a statement Tuesday. Low commodity prices and a strong dollar that makes U.S. exports more expensive in foreign markets are likely to weaken results this year, CSX said.
While the railroad’s fourth-quarter profit of 48 cents a share beat analyst estimates of 46 cents as the railroad cut costs, revenue tumbled 13 percent on slumping cargo volumes. Freight fell 6.4 percent for large U.S. rail companies in the quarter, led by a 20 percent coal decline, according to the Association of American Railroads.
The forecast of lower 2016 earnings per share may put “modest pressure on the stock,” said Ben Hartford, an analyst with Robert W. Baird & Co. in a note. CSX’s earnings per share will be little changed this year compared with last year’s level, according to analyst estimates compiled by Bloomberg.
CSX fell 2.2 percent to $23.17 after markets closed in New York. The shares plunged 30 percent in the 12 months through Tuesday’s close.
The company shut mechanical shops in Kentucky and closed switching operations in Tennessee to reduce expenses, a focus of all North American railroads as cargo demand shrinks.
A previously disclosed property sale added 5 cents a share to fourth-quarter earnings.
“CSX will continue to be rigorous about efficiency, resources and service quality in order to maximize shareholder value and achieve a mid-60s operating ratio longer term,” the company said.