CSX rallies after leading off the earnings season for the rails sector

[CSX Locomotive Close-Up, Folkston, Georgia (USA)]
John M. Chase

CSX Corporation (NASDAQ:CSX [https://seekingalpha.com/symbol/CSX]) traded higher in postmarket action after it led off the earnings season for the rails sector.

Revenue fell 0.8% year-over-year to $3.59 billion, topping the consensus estimate by $20 million. The effects of lower export coal prices and a decline in merchandise volume were only partially offset by increases in other revenue, higher pricing in merchandise, and intermodal volume growth.

Volume totaled 1.61 million units for the quarter, up 1% year-over-year and 2% higher sequentially. Volume was higher in the minerals (+8%), automotive (+1%), and fertilizers (+7) categories, while lower in the chemicals (-7%), forest products (-7%), and agricultural and food products (-7%) categories.

CSX (NASDAQ:CSX [https://seekingalpha.com/symbol/CSX]) reported adjusted operating income of $1.25 billion and an operating margin of 34.9%. Non-GAAP EPS of $0.44 for the quarter was ahead of the consensus estimate of $0.42 but trailed last year's mark of $0.46.

"This quarter’s operational performance reflects the dedication of our workforce and our commitment to running the best railroad in North America," stated CEO Steve Angel. "We see clear opportunities to leverage that operational strength moving forward. Looking ahead, CSX is well-positioned to build on this momentum to deliver long-term profitable growth and create value for our shareholders," he added.

Shares of CSX (CSX [https://seekingalpha.com/symbol/CSX]) rose 3.3% in postmarket trading. The rails stock is up more than 10% over the last six weeks amid the M&A focus in the sector. Union Pacific (UNP [https://seekingalpha.com/symbol/UNP]) and Norfolk Southern (NSC [https://seekingalpha.com/symbol/NSC]) have agreed to merge to form the nation's first coast-to-coast transcontinental freight rail operator, pending regulatory approval. The deal is valued at approximately $85 billion and is expected to undergo a lengthy review process by the federal Surface Transportation Board.

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