CSX’s first-quarter earnings per share rose by 13 percent to 45 cents, its third straight quarter of double-digit earnings growth. But the Jacksonville-based railroad company doesn’t expect to keep up that growth rate.
After announcing its first-quarter earnings late on Tuesday, CSX on Wednesday warned investors that the company will likely not reach its target of double-digit growth for all of 2015. It will more likely grow by a mid to high single-digit percentage.
“For the first quarter, we did well,” Chairman and CEO Michael Ward said in an interview Wednesday.
“Our expectation was that we would do that for the entire year,” he said.
However, two factors affected the company’s forecast, he said. One is low natural gas prices, which is continuing to reduce domestic demand for coal.
Coal volumes have been falling in recent years for CSX and other railroads but coal shipments remain CSX’s biggest business, accounting for $638 million of its total first-quarter revenue of $3.03 billion.
Ward said the company is revising its original forecast of flat coal volumes this year.
“At this point we’re predicting it will be down at least 5 percent,” he said.
The other factor affecting CSX’s business is the strong U.S. dollar, which is reducing the value of metals shipped from overseas markets for transport on CSX’s rails. Also, the strong dollar is reducing the value of export coal shipments.
Ward also said lower fuel prices will reduce the amount of fuel surcharge recovery revenue recorded by CSX.
While that will lower revenue, it does not impact the company’s profit.
The reduced earnings forecast did not have much of an impact on CSX’s stock, which moved little Wednesday after the announcement. CSX had already warned investors last month that coal volumes may be lower than expected.
“I think most of the analysts could see where the carloads were and weren’t surprised to see what we did,” Ward said.
CSX did have some good news for investors Tuesday, as it announced the board of directors approved a 2-cent increase in the quarterly cash dividend to 18 cents a share.
CSX said this is the company’s 13th increase in the dividend in the last 10 years, representing a 26 percent compound annual growth rate.
The company also announced it would repurchase $2 billion in stock over the next 24 months. When a company buys back its stock, it makes the remaining shares more valuable by reducing the number of shares outstanding in the market.
“Obviously, the board and the company are feeling pretty good about our future,” Ward said.
(904) 356-2466