As expected, the weather in much of the Eastern U.S. had a negative impact on CSX Corp.’s first-quarter earnings, and the harsh winter will continue to have an impact — both positively and negatively — on the Jacksonville-based railroad company’s second quarter results.
CSX late on Tuesday reported first-quarter earnings of 40 cents a share, 5 cents lower than the first quarter of 2013.
In an interview Wednesday, CSX Chairman, President and CEO Michael Ward said weather-related disruptions increased operating expenses by 6 cents a share in the first quarter for the company, which operates throughout the Eastern U.S.
Ward said it is more difficult to pinpoint the amount of revenue lost due to the weather but the company is estimating it impacted earnings by 2 cents to 3 cents per share, so weather reduced CSX’s total earnings by 8 cents to 9 cents a share in the first quarter.
CSX’s total revenue did rise by 2 percent to $3.01 billion in the quarter but its operating ratio — operating expenses divided by revenue — rose to 75.5 percent in the quarter, compared with 70.3 percent in the second quarter.
The company has a long-term goal of maintaining an operating ratio in the mid-60s percent range.
Ward said CSX is still feeling the effects of winter disruptions on its operating ratio. “There will be some impact in the second quarter,” he said.
However, revenue is growing strongly, with the volume of cargo carried on CSX’s rail lines up 10 percent so far in the second quarter, he said.
Pent-up demand from winter could help increase CSX’s revenue in the coming months. For example, Ward said U.S. light vehicle sales are forecast to rise from 16.2 million in 2013 to 16.8 million this year. However, CSX’s automobile volume fell by 7 percent in the first quarter, which was attributed to the weather. That could mean more cars shipped by the railroad this quarter to make up for the drop in the first quarter.
Meanwhile, after several years of decline in coal shipments, CSX is experienced increased domestic demand for coal.
“The winter helped, and natural gas prices going up helped,” Ward said.
Domestic coal volume rose 8 percent in the first quarter, almost offsetting a 15 percent drop in export coal volume. The company’s net coal volume declined by 1 percent.
Ward said CSX is forecasting “mid-to-high single-digit” percentage growth in domestic coal shipments for all of 2014 and “for the year, we’ll probably be positive on carloads” of coal overall.
“The export (coal volume) is always more volatile,” he said.
Ward said CSX is expecting the overall U.S. economy to have a positive impact on CSX’s earnings for the full year.
He said U.S. housing starts are expected to grow from 950,000 last year to 1.13 million this year, which will lead to higher shipments of construction materials. He also said intermodal volume — using trucks in combination with the railroad –– is expected to grow by a “high single-digit” percentage.
In addition to announcing earnings, CSX on Tuesday also said its board of directors approved a 1 cent increase in the company’s quarter dividend to 16 cents per share. The dividend has been increased 11 times in the past eight years.
“I think it just shows we have continued confidence in our future,” Ward said.
(904) 356-2466