First quarter results included 5 cents per share from a non-cash equity earnings adjustment this year and 2 cents per share from insurance recoveries last year. On a comparable basis, excluding these items, first quarter EPS was up 60% from a year ago.
"Our highly focused workforce continued to drive shareholder value at a record setting pace in the first quarter by delivering outstanding safety, customer service and financial results," said Michael Ward, chairman, president and chief executive officer. "In addition, the diverse business portfolio we have created is allowing the company to grow though the current economic cycle."
CSX generated significant revenue growth in six of its ten markets, resulting in record first quarter revenues of $2.7 billion, a 12% increase over the first quarter of 2007. The company overcame softness in the housing and automotive sectors through yield management, fuel recovery and market drivers including growth in ethanol and grain shipments, increased demand for export coal, and a stable industrial economy.
The company achieved these revenue gains while holding non-fuel expenses flat, which drove record first quarter operating income of $626 million, up from $485 million last year. The respective quarters included insurance gains of $2 million and $18 million. On a comparable basis, excluding these gains, operating income was up 34%. At the core of this improvement were stronger safety and service levels, greater labor productivity and increased fuel efficiency, resulting in a 370 basis point improvement in the operating ratio to 77% on a comparable basis.
Reflecting the company's strong first quarter performance and the underlying strength of its business, CSX is now targeting the upper end of its previously announced 2008 EPS guidance of $3.40 - $3.60 on a comparable basis.
CSX also reaffirmed its long-term financial targets announced on March 17, 2008. With 2007 as the baseline, the company is confident that it can achieve compound annual growth in operating income of 13 to 15%, as well as 18 to 21% compound annual growth in EPS before the impact of share repurchases through 2010. Additionally, CSX is targeting an operating ratio in the low-70's and free cash flow before dividends exceeding $1 billion in 2010.
The company repurchased $300 million of its outstanding common stock in the first quarter and remains committed to repurchasing an additional $3 billion in common stock by the end of 2009. As previously stated, the company is also investing $5 billion in its transportation network between 2008 and 2010 to meet the nation's burgeoning demand for freight rail service.
"Our guidance and actions to enhance shareholder value are indicative of our momentum and confidence in the future of the company," said Ward. "CSX is poised and motivated to deliver substantial value in the short term while enhancing its network and service to create value for many years to come."
