CSX Corp. reported a 13 percent increase in earnings per share and a 5 percent gain in revenue in the fourth quarter, but the Jacksonville-based railroad company’s stock dropped Tuesday after the earnings report because investors were looking for higher numbers.
According to CSX Chairman, President and CEO Michael Ward, investors shouldn’t have been surprised by the earnings report, which came after the stock market closed on Monday.
“We’re not unhappy,” Ward said in an interview Tuesday.
CSX’s earnings of 43 cents a share were a penny below the average forecast of analysts surveyed by Thomson Financial, and its $2.95 billion in revenue was lower than the average forecast of $2.99 billion.
However, Ward said some of the analysts surveyed were overly optimistic about the quarter. He said weekly freight volume statistics on U.S. railroads that are publicly available should have indicated to them that revenue would be lower than they were anticipating.
“I think we’ve got something like 30 people that follow us,” Ward said. “Some pay a lot of attention and some don’t.”
Ward is feeling pretty good about what CSX accomplished in 2011. The company had record-high full-year revenue of $11.7 billion, up 10 percent from 2010, and earnings per share of $1.67, up 24 percent.
CSX also improved its operating ratio — expenses divided by revenue — from 71.1 percent in 2010 to 70.9 percent in 2011 despite rising fuel prices. Without the fuel increases, the operating ratio would have been 69.8 percent in 2011, Ward said.
CSX’s operating ratio did increase in the fourth quarter to 71.5 percent, in part because of fuel but also because the company brought on more resources to maintain service levels on the railroad. Volume early in the fourth quarter was lower than expected, Ward said, so the increases in staff and equipment added more expense.
“Volume was a little softer in October and November than we expected,” he said, but it did improve in December.
CSX’s overall employment throughout its 23-state system grew by about 2,100 from December 2010 through December 2011 to an estimated 32,235.
Ward said the company is expecting a slight net increase in employment this year but that the company could end up hiring 3,000 new workers, depending on attrition.
The company announced one major executive change Monday, with Executive Vice President Oscar Munoz moving from chief financial officer to chief operating officer. The announcement said that former COO David Brown was no longer with the company but did not say why.
“The company chose that that’s the best thing for the company,” Ward said Tuesday. He would not say anything more.
He does expect Munoz to be well received in his new role.
“He did a great job as CFO. He’ll do a great job as COO,” he said.
Ward said CSX is optimistic about the 2012 economy.
“We are thinking that it looks pretty healthy,” he said. “We think there’s pretty good strength in most markets.”
He said housing continues to look weak, which will lower the volume of housing-related materials transported on the railroad.
The automobile market looks strong, and that will also bring increases in other freight segments like metals and chemicals. The expectations for agriculture also are strong, he said.
Coal shipments are CSX’s biggest business segment, accounting for 31.6 percent of 2011 revenue. Ward said the company is expecting a decline in domestic coal demand in 2012 but an increase in the export market, which would continue the 2011 trend.
Overall, Ward thinks 2012 will be a good year for CSX after its record results in 2011.
“We’re going to do it again next year,” he said.
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