By Arionne Nettles
Rail transportation company CSX Corp. posted slightly better-than-expected quarterly earnings as cost-cutting more than offset falling sales.
Net income at the second-largest U.S. railroad fell 0.4 percent to $507 million for the fiscal quarter ended Sept. 30, from $509 million in the year-ago period.
Earnings per share rose a penny to 52 cents per diluted share from a year ago, beating the analysts’ consensus estimate by 2 cents.
Revenue for the Jacksonville, Florida-based company declined 9 percent to $2.94 billion from $3.22 billion in the prior year, below Wall Street expectations of $2.97 billion.
“As we look across our business, low natural gas prices are clearly challenging domestic coal volume,” said Michael Ward, chairman and CEO of CSX Corp., on Wednesday’s earnings conference call. “More broadly, low commodity prices and the strength of the U.S. dollar continue to challenge many of our other markets.”
A strong U.S. dollar hurts demand for American exports by making them more expensive to overseas buyers. In August, exports fell by $3.7 billion, or about 2 percent.
CSX said coal shipments in the quarter dropped 18 percent from a year ago as overall demand for fuel fell. Other categories that declined included waste and equipment, down 15 percent, and metals, also down 15 percent.
Declines in the volume of shipments and lower energy prices are also hurting other rail transportation companies, which are scheduled to report their earnings results in the next several weeks.
“Coal cars have declined precipitously this year at both the eastern rails and at Union Pacific, and we expect CSX coal to continue to decline severely during the fourth quarter, then taper off in 2016,” Morningstar analyst Keith Schoonmaker wrote in a research note.
Intermodal growth — the shipment of goods by both truck and rail — rose 6 percent in the quarter. CSX is currently leading industry-wide intermodal growth, according to the Association of American Railroads. For the week ended Oct. 10, intermodal shipments at CSX gained 10 percent.
The company cut expenses in the quarter, including furloughing 1,200 employees, and said it will reduce employee head count by another 2 percent in the current quarter, or about 600 employees.
Expenses overall were 11 percent lower than a year ago, the company said, driven primarily by lower fuel prices.
Shares of the company fell almost 2 percent, or 52 cents, to close at $27.19 Wednesday.