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UPDATE 4-Coal, consumer goods rail shipments lift CSX Corp's quarterly profit
October 17, 2017 / 12:33 PM / a month ago

UPDATE 4-Coal, consumer goods rail shipments lift CSX Corp's quarterly profit

(Adds stock price change, paragraph 2; background on coal volumes, paragraph7)

By Eric M. Johnson

Oct 17 (Reuters) - CSX Corp, the third-largest U.S. railroad operator, reported a slight rise in quarterly net profit on par with analyst expectations on Tuesday, as coal and consumer goods shipments and higher freight rates lifted its revenue 1 percent.

The results sent CSX shares up about 1.3 percent to $53.56, though the company pointed to headwinds in several markets and efforts to overcome persistent service disruptions that have rankled key customers since the summer.

Rapid-fire changes to operations and cost cuts since March under newly appointed Chief Executive Hunter Harrison, and ensuing service delays, have drawn scrutiny from rail regulators and raised questions about how long it could take for his “precision scheduled railroading” strategy to fully take root.

CSX’s service was also crimped by derailments and Hurricane Irma, which slammed the U.S. Southeast last month.

“Considering the effects of both Hurricane Irma and CSX’s well-publicized service disruptions, this is a solid report by CSX,” said Edward Jones analyst Dan Sherman.

The Jacksonville, Florida-based company’s freight volumes were up 1 percent in the quarter, driven by shipments of coal and consumer goods, which offset declines in almost every other commodity CSX hauls, such as vehicles and fertilizer.

Coal volumes have recovered slightly this year after two years of precipitous declines.

Even so, the company warned of future headwinds in several markets, citing declining auto production and short-haul domestic coal.

Harrison also appeared to tamp down expectations for the fourth quarter, saying CSX’s system will see improvements in 2018 and start to “make nice, reasonable pickups” from more favorable pricing and better service from 2019.

CSX’s revenue grew 1 percent to $2.74 billion, from $2.71 billion, but was short of analyst expectations of $2.77 billion.

CSX reported an operating ratio, which measures operating costs as a percentage of revenue, of 68.1 percent, down from 69 percent. CSX maintained a projected full-year operating ratio around the high end of the mid-60s.

CSX posted third-quarter net income of $459 million, or 51 cents per share, up from $455 million, or 48 cents per share a year earlier.

On the call, Harrison, a 72-year-old famous for turning around Canadian railroads, said he may offer details about his succession plan - a major concern for shareholders - at a conference at month’s end.

“It’s something that the board is very sensitive to,” he said. (Reporting by Eric M. Johnson in Seattle; Editing by Bernadette Baum and Cynthia Osterman)

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