The Wall Street Journal-20080123-Earnings Digest- CSX and Norfolk Southern Buck Slowdown to Log Higher Profits
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Earnings Digest: CSX and Norfolk Southern Buck Slowdown to Log Higher Profits
Railroad operators CSX Corp. and Norfolk Southern Corp. posted fourth-quarter earnings increases despite the weakening housing sector, slowing economy and higher fuel costs.
CSX said fourth-quarter net income rose 5.2% as rate-price increases and improved delivery times offset lighter shipment volumes as well as fuel prices. The Jacksonville, Fla., company said revenue rose 7.6% to $2.58 billion.
CSX also maintained its long-term financial outlook and stuck to planned price increases for 2008. Its shares were up $2.21, or 5.4%, at $43.39 in 4 p.m. New York Stock Exchange composite trading yesterday.
CSX said increased demand for ethanol sparked higher shipment volume for agricultural fertilizers and other commodities. This helped cushion the blow from softness in the housing and automotive markets that led to fewer shipments of lumber, building products and appliances in the quarter.
CSX said it plans to raise freight rates by 5% to 6% in 2008.
In the past year, railroads have added fuel surcharges to their rates to cover increasing costs.
Later in the day, Norfolk Southern posted a 3.6% increase in fourth- quarter net income. Its shares were up 92 cents, or 2.1%, to $45.07 yesterday in 4 p.m. NYSE composite trading.
The Norfolk, Va., railroad company said the latest results include a $26 million gain from a contract volume settlement. The company agreed in October to pay about $7.4 million in restitution for environmental damage and costs caused by a train derailment and chemical spill in Pennsylvania in June 2006.
Shipping volumes for Norfolk Southern, the nation's largest rail carrier of automotive parts and finished vehicles, fell 3%. The slowing U.S. economy has resulted in lower railroad industry volumes during the past year.
The railway operator's general merchandise revenue climbed 10% while volume was flat. Coal revenue rose 1.5% amid a 5% drop in volume. Intermodal revenue, or sales from the movement of freight by two or more modes of transportation, increased 0.6% on a 4% slump in volume.
The numbers were a surprise after Norfolk Southern executives in October said challenges presented by the weak housing industry and fewer coal and intermodal shipments were likely to remain in the fourth quarter and into 2008.
Norfolk Southern said it would raise its regular quarterly dividend 12% to 29 cents a share.
