NEW YORK (CNNfn) - Troubled railroad CSX Corp. missed lowered earnings estimates for the first quarter Monday, citing higher fuel and labor costs along with continuing congestion problems.|
The Richmond, Va.-based railroad holding company posted net income of $29 million, or 14 cents a diluted share. Analysts surveyed by earnings tracker First Call had forecast 15 cents a diluted share, an estimate that had fallen steadily since the company admitted to financial problems in December.
Before the Dec. 20 warning, analysts had forecast 70 cents a share for the first quarter.
In the year-earlier quarter, CSX earned $75 million, or 36 cents a share. A $49 million after-tax charge for a change in accounting practices lowered net income to 12 cents a share in that period.
CSX integrated about half of the former Conrail into its system last June, and has suffered from service problems since. Those problems were made worse by storms last fall, and by a federal safety report last month that criticized the quality of its track and ordered many of its trains to run at lower speed. The president of the company's railroad unit resigned earlier this month.
"Hopefully this is a low point for us," CSX Chairman and Chief Executive John Snow told analysts when reviewing the numbers in New York Monday. "We simply aren't getting the railroad fixed at the rate we should."
But while Snow and other executives vowed improvement, they wouldn't give any time frame for the turnaround, or give new guidance on earnings for the remainder of the year.
"You will be seeing sure and steady progress in next 90 days, he said. "You say, 'When will it be fixed?' But I'm as wary of making predictions as you are at listening to them."
Analysts have forecast the company will earn 43 cents a share in the second quarter, down from 45 cents a share a year ago, and $2.01 a share for the year, up from $1.59 a share in 1999.
Revenue fell to $2.1 billion in the latest period from $2.5 billion a year earlier due to a $737 million decline in revenue from maritime operations following the sale of Sea-Land Service Inc., its former ocean container business, to Maersk Line late last year. The company also had $100 million less in revenue due to a 13-week quarter compared with a 14-week period a year earlier.
But year-ago results did not include revenue from the Conrail system, which CSX still was operating in conjunction with purchase partner Norfolk Southern Corp. (NSC: Research, Estimates) at the time. The addition of Conrail traffic in the New York area brought in about $300 million of additional revenue.
Revenue from rail operations climbed to $1.8 billion from $1.5 billion, but operating expenses increased even faster. So the ratio of operating expenses to revenue, a key measure of a railroad's financial performance, deteriorated to 91.1 percent from 81.4 percent a year earlier.
Snow said problems had improved much faster in the northern portion of the system than in the southern region. But he admitted that even the northern portion was not where it needs to be yet in terms of performance.
Officials said rising fuel prices also hurt the company. The price per gallon of diesel fuel nearly doubled, adding $66 million to operating expenses in the quarter. Executives told analysts that strong demand for services is allowing the railroad to work in rate increases, which should cover the additional cost of fuel for the remainder of the year.
"Demand is very strong," said Paul Goodwin, CSX's chief financial officer. "To some extent the demand was unmet because of our service problems. We're confident that with improved service, we can achieve rate increases on a market by market basis."
Despite the report, shares of CSX climbed 7/16 to 21-1/16 in early trading Monday.