LONDON: CSX Corp. said Tuesday that its fourth-quarter revenue fell by 13% as lower coal volumes, which has hurt the entire railroad sector, continued to weigh on the rail giant.
The company managed to beat, however, Wall Street expectations for earnings, partly because of lower fuel costs and efficiency gains.
According to a regulatory filing, the Jacksonville, Fla.-based railroad saw coal volumes plunge 32% for the fourth quarter ended Dec. 25. In an accompanying news release, the company also cited getting less money from fuel surcharges because fuel prices have fallen—and a rocky transition from coal hauling being so prominent in its business mix.
“With negative global and industrial market trends projected for 2016, full-year earnings per share are expected to be down compared to 2015,” said CEO Michael J. Ward, looking ahead to the new fiscal year. A more detailed outlook wasn’t provided Tuesday.
CSX has felt the same pressures as other railroads: sliding oil and commodities markets, weakening manufacturing and tremors from the slowdown in China.
But the retreat of coal shipments, a key source of revenue for railroads, has been the stiffest headwind. Coal is the sector’s single-largest source of U.S. carloads, accounting for about a third of the total. Coal volumes have slumped as power plants have switched to natural gas, whose price in 2015 hit its lowest annual average since 1999, according to the U.S. Energy Information Administration.
Total U.S. rail traffic declined 2.5% last year to 28 million carloads and containers, according to the Association of American Railroads. For 2016, Stephens Inc. analysts forecast a 1.6% decline.
CSX has responded by laying off employees, storing locomotives and squeezing margins. Overall, for the three months ended in December, CSX reported a profit of $466 million, or 48 cents a share, down from year-ago profit of $491 million, or 49 cents a share.