Earnings Cheat Sheet: Is CSX a Leading Indicator of an Economic Recovery?

Founded in 1978, CSX Corporation (NYSE: CSX) is one of the largest railroad transportation companies in the world.  The company’s transportation system connects to 23 eastern states, and more than 70 river, lake, and ocean ports.  After making a $34 billion investment in Burlington Northern, Warren Buffett declared, “ its an all-in wager on the economic future of the United States.” Is the latest earnings report from CSX predicting an economic recovery, or an economy about to veer off the tracks?

Earnings: Increased to $414 million ( $1.08 per share) from $290 million ($.73 per share) in the period last year.  This represents a third quarter record for CSX.

Revenues: Increased 16% from last year to almost $2.7 billion.  This was due to a 10% increase in volume.  More importantly, operating income increased 39% to $825 million.

Actual versus Wall Street Expectations: Actual earnings per share of $1.08 beat the average analyst estimates of $1.04 per share.  CSX has consistently beat earnings every quarter for the past two years.

Notable Stats: CSX believes in returning value to shareholders.  The company has increased its dividend 8 times in the past 5 years.  The company also increased its same store sales by 6.6%  over prior year period. (Same store refers to same customers and similar cargo)

Did you Hear That? CEO Michael Ward had the following to say, “ As the economy continued to improve, CSX saw volume growth in nearly all markets while delivering another strong performance in safety, service, and productivity.  These positive financial results are enabling the company to increase investments that create competitive advantages for customers, grow the business, create jobs, and deliver shareholder value.”   CSX will be increasing its capital investment estimates from $1.7 billion to $ 1.8 billion for 2010.

Looking forward, CSX expects growth in the next quarter to continue.  The company expects to see Q4 YoY growth in 9 out of 10 markets.  Areas such as  coal and agriculture are expected to stay strong.  However, CSX does expect a continuing weak area in housing and military rail transportation.  Investors need to proceed with caution as the damaged housing market continues to weigh on the economy.

Disclosure: No positions.