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CSX’s Q4 Earnings Beat Expectations on Higher Pricing and Volumes

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CSX surpassed expectations

CSX (CSX) reported better-than-expected results for the fourth quarter. Moreover, the company’s quarterly revenues and EPS improved significantly on a YoY basis. The company’s fourth-quarter EPS of $1.01 was a couple of cents higher than analysts’ estimate of $0.99 and registered YoY growth of ~58% as well. The robust growth in bottom-line results was mainly driven by higher revenues, lower costs, and reduced taxes. The company witnessed over 50% earnings growth in all four quarters of 2018.

Revenues for the quarter came in at $3.14 billion, marginally higher than Wall Street analysts’ estimate of $3.13 billion. Quarterly revenues also marked YoY growth of 10% mainly driven by a 3% rise in volumes, higher fuel recoveries, and pricing gains across all major markets.

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Going forward, CSX’s adoption of a PSR (precision scheduled railroading) system continued to help it lower costs and improve operational efficiency. In the fourth quarter, the company’s expenses increased just 2% to $1.89 billion when compared with the year-ago quarter. As a result, CSX’s fourth-quarter operating ratio (operating expenses as a percentage of revenues) contracted 40 basis points YoY to 60.3%. This quarter was the railroad company’s record fourth-quarter operating ratio.

For the full year, CSX reported revenues of $12.25 billion, which surpassed analysts’ expectations of $12.23 billion and grew 7% YoY as well. EPS of $3.85 beat the consensus estimate by three cents and marked a YoY improvement of 67%.

CSX’s top competitors are yet to report their full-year results. Major US railroads (IYT) Kansas City Southern (KSU), Union Pacific (UNP), and Norfolk Southern (NSC) are expected to post 2018 EPS growth of 13.7%, 35.6%, and 40%, respectively, on a YoY basis.

Balance sheet and shareholder wealth

CSX exited the year with cash, cash equivalents, and short-term investments of $1.11 billion and had $14.74 billion of long-term debt as of December 31, 2018. During the year, the company generated $4.64 billion of cash flow through operating activities.

Furthermore, the company continues to enhance shareholder wealth through dividend payments and share repurchases. Last year, CSX paid $751 million in dividends and bought back $4.67 billion worth of common stock. Apart from this, the company yesterday announced a new share repurchase program of $5 billion.

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