CSX earnings fall, says worst of recession is over

NEW YORK — CSX Corp., the nation’s third largest railroad, said Tuesday it believes the worst of the recession is over, but its third-quarter earnings fell 23 percent from a year ago because shipping demand is still weak.

CSX, which operates its signature blue and yellow locomotives from Canada to Florida and west to the Mississippi River, said overall shipping fell 15 percent from a year ago in the June-to-September period. The biggest drops were in shipments of coal, cars, construction and consumer goods. The company warned that demand for coal, one of its biggest segments, will remain weak well into next year.

But CSX said that the third-quarter decline in total volume wasn’t as steep as in the second quarter — possibly indicating the start of an economic recovery in the U.S. Rail traffic is seen as an indicator of the economy’s direction because so many everyday goods are shipped on the tracks.

CSX earned $293 million, or 74 cents per share, in the third quarter.

Revenue fell 23 percent to $2.29 billion, mostly due to lower fuel surcharges.

Analysts polled by Thomson Reuters expected earnings of 71 cents per share on revenue of $2.32 billion.

“The third quarter reinforces our view that the worst of the recession is likely behind us,” President and CEO Michael J. Ward said in a statement.

But more tough times may still lie ahead. Several analysts have said that some things that helped CSX in the period are not sustainable and may prove to be stumbling blocks in the current quarter.

Rail traffic in the quarter was boosted slightly by the Cash for Clunkers program and inventory replenishment as stores started ordering more goods. But now that the program is over, analysts think that automobile volumes won’t remain at levels similar to when the program was active. They also believe that consumer orders will fall back in the fourth quarter, which could drag down freight volumes on the railroads.

So far this year, the Association of American Railroads said traffic is down 18.8 percent compared with the same period a year ago.

The company offset some slower business in the third quarter by drastically cutting expenses. Total operating costs fell by 24 percent. Fuel costs were less than half what they were a year ago.

CSX, the first major railroad to report third-quarter results, said “pricing remained strong and consistent with prior quarters,” although it made less money per unit of freight than it did at the same point last year.

The stock was up 3 percent in aftermarket trading at $45.27. It closed down 63 cents to end the regular session at $44.28. CSX shares have risen over 36 percent in the last three months, peaking at $48.17 on Sept. 10.