On Jan. 17, CSX Corporation announced fourth quarter 2016 net earnings of $458 million, or $0.49 per share, versus $466 million, or $0.48 per share, in the same period of last year.
The fourth quarter of 2016 included an operating property sale and a debt refinancing charge, both of which were $0.08 per share and offset each other in the quarter. In addition, the fourth quarter included an extra accounting week resulting from the company’s 52/53 week fiscal reporting calendar, which benefitted earnings per share by $0.03 per share.
Including the extra week, fourth quarter revenue increased 9% and expenses increased 2%. Operating income for the quarter was $1 billion, which included the $115 million gain from the property sale and the $62 million benefit from the extra week.
For the full year 2016, CSX says "the industry continued to face headwinds from low global commodity prices and strength of the U.S. dollar." In this environment, CSX generated $11.1 billion in revenue as volume declined 5% overall with a 21% decline in the company’s coal business. Even with these ongoing challenges, CSX delivered earnings per share of $1.81, operating income of $3.4 billion and an operating ratio of 69.4%.
“In an environment where the company lost almost $470 million of coal revenue and experienced weakness across most of its markets, CSX delivered nearly $430 million of productivity savings in 2016, while improving customer service,” said Michael J. Ward, chairman and chief executive officer. “With business conditions gradually improving and the ongoing transformation into the CSX of Tomorrow, we will continue to deliver sustainable shareholder value.”
Cowen and Company Managing Director and Railway Age Wall Street Contributing Editor Jason Seidl offers the following analysis:
“CSX reported 4Q16 EPS of $0.49, compared to our and consensus estimates of $0.48 and $0.50, respectively. While this is just a penny miss to consensus, we believe some investors’ confidence that the company would beat consensus had been rising based primarily on management’s relatively positive tone in presentations since third-quarter earnings. Operating income increased 12% y/y to $889 million (excluding a land sale) and was in line with consensus and ahead of our estimate of $850 million. Revenue grew 9% to $3.04 billion, ahead of our and consensus estimates of $2.78 billion and $2.89 billion, respectively. The operating ratio (OR) improved by 90 bps y/y to 70.7% but was 120 bps worse than our assumption and 140 bps worse than the implied consensus OR.
“All-in pricing came in at 2.8%, representing a 50 bps improvement from the 2.3% achieved in 3Q16, which was a 60 bps moderation from 2.9% in 2Q16, which in turn followed 3.1% in 1Q16. The sequential 4Q16 improvement occurred as positive export coal pricing helped offset a 40 bps moderation in merchandise and intermodal pricing, which may have been partly attributable to continued competitive pressure from trucking. In our Jan. 17 proprietary 4Q16 Rail Shipper Survey, shippers’ expectations for rail pricing in the next 6-12 months registered at 2.7%, up from 2.1% in our 3Q16 survey.