"Each quarter we see a little more strength," said CSX Chairman Michael Ward. "As we look to the second half of the year, we think almost all our major markets are going to continue to see that gradual recovery. We expect to have a very good 2010."
Jacksonville, Florida-based CSX reported late Monday that net income for the railroad, one of the largest in the United States, rose 36 percent in the second quarter, beating analysts' expectations.
Volume improved across the varied markets the company serves, and its revenue grew 22 percent to nearly $2.7 billion.
Company officials said they were seeing evidence that the industrial economy was expanding as inventories remain low.
Strong growth is seen in the company's intermodal business, both internationally and domestically, and increased automotive production should spur higher shipping volumes related to that sector, Ward said. Automotive volume jumped 63 percent in the second quarter.
"That drives some related industries like metals and chemicals that go into the production of automotive," he said.
Company officials said CSX's coal business was on the rise, with coal revenue up 26 percent in the second quarter. Coal volume should continue to be helped by increased Asian export demand and higher industrial demand even as utility demand remains stagnant due to high stockpiles, the company said.
One notable negative continues to be the housing market.
But overall, CSX officials are so confident in what appears to be an improving economy that they plan to hire 500 to 1,000 workers in the next year.
"We will start doing some selective hiring in the second half," Ward said.
Dahlman Rose analyst Jason Seidl said the CSX results bode well for other U.S. railroads and for the economy overall.
"I hope CSX (results) put some confidence back in investors in terms of the railroads and their ability to grow," Seidl said.
CSX said net income for the second quarter was $414 million, or $1.07 per share, compared with $305 million, or 77 cents a share, in the same period last year.
Not counting discontinued operations, earnings rose 47 percent and earnings per share were up 51 percent from a year earlier.
Analysts on average were expecting 98 cents a share, according to Thomson Reuters I/B/E/S.
Revenue growth and continued operating leverage drove record operating income of $768 million and an operating ratio of 71.2 percent. (Reuters)
