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CSX’s 4Q17 Earnings Shine, Stock Still Slides

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Jan. 18 2018, Updated 9:06 a.m. ET

CSX’s 4Q17 earnings

On January 16, 2018, Jacksonville-headquartered rail freight giant CSX (CSX) released its 4Q17 and calendar 2017 earnings. This quarter represents the third quarter since the company shifted toward a Precision Schedule railroading model under the leadership of former CEO (chief executive officer) Hunter Harrison.

In 4Q17, CSX surpassed the analysts’ earnings estimate of $0.56 by 13.7%. The company’s EPS (earnings per share) after adjusting for tax reform benefits was $0.64 that quarter. On a YoY (year-over-year) basis, CSX’s adjusted earnings were 31% higher in the fourth quarter of 2017.

CSX’s EPS jumped sharply to $4.62, compared with its earnings of $0.49 per share in 4Q16. It included in its 4Q17 results a $3.5-billion or $3.89-per-share non-cash reduction in income tax expenses due to the revaluation of deferred tax liabilities.

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Why did CSX’s stock price slide?

The company’s new operational-level turnaround program resulted in significant service issues for CSX’s customers. In Market Realist’s pre-earnings piece on CSX 4Q17, we discussed these issues. But CEO James Foote has vowed to win back customers.

Compared to CSX, arch-rival Norfolk Southern (NSC) recorded a better shipment rise in 2017, and CSX’s 4Q17 results raise concerns about top-line growth, as revenues fell 6%.

On October 16, 2018, markets reacted negatively to the company’s earnings, pulling down CSX’s stock by 1.9% and closing the stock at $58.1. The company’s stock fell 1.3% in after-hours trading. The peer group’s stocks reacted to the company’s 4Q17 earnings on January 16, 2018, in the following way:

  • Norfolk Southern (NSC): 0.9% fall
  • Union Pacific (UNP): 0.6% fall
  • Kansas City Southern (KSU): 0.5% rise
  • Canadian National Railway (CNI): 0.3% rise
  • Canadian Pacific Railway (CP): 0.7% fall
  • Genesee & Wyoming (GWR): 1% fall

On the same day, the SPDR S&P Transportation ETF (XTN), which has 12.7% of its total portfolio holdings in US railroads, fell 1.8%.

In this series

In this 4Q17 post earnings series, we’ll dive into CSX’s segment-wise revenue performance and overall margins. In the end, we’ll take a look at Wall Street for its opinion on CSX and its peers after the 4Q17 earnings.

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