CSX shares climbed on Thursday after the biggest railroad company in the eastern US projected a 25 per cent rise in full-year earnings per share from a year ago and delivered upbeat first-quarter results.
Shares in CSX jumped 5.6 per cent to $49.56 in its biggest one-day jump since January, when it was first reported that industry veteran and former Canadian Pacific chief executive Hunter Harrison could be eyeing the top job at the company.
The Florida-based company, now run by Mr Harrison, said it expected full-year earnings to rise 25 per cent from the $1.81 a share reported in 2016. CSX also said profits in the first quarter increased to $362m, or 39 cents a share, in the quarter ended in March, compared with $356m, or 37 cents a share, in the year-ago period. Adjusting for one-time items such as a $173m restructuring charge, adjusted earnings of 51 cents a share were above analysts’ estimates of 44 cents.
Revenue for the quarter rose 10 per cent to $2.9bn, ahead of Wall Street forecasts of $2.8bn and reflecting volume growth across most of its markets. Coal volumes increased 3 per cent from a year ago.
Analysts at Barclays noted that within a month of joining CSX, Mr Harrison, known for pioneering precision railroading — a strategy that involves running trains faster and closer to schedule rather than waiting for them to fill up — had delivered “tangible change”.
“Purported terminal closures, lower headcount and admittedly brighter export coal prospects drive a higher outlook for CSX,” Brandon Oglenski, an analyst at Barclays, said. “We think this is the first of many favourable results to come as the company adopts the precision railroad model and a strong operationally focused culture.
CSX was not the only railroad rallying on Thursday, however. New York-listed shares in Mr Harrison’s former company, Canadian Pacific, which runs one of North America’s largest rail networks, rose 2.6 per cent to $153.78 after it posted its first increase in quarterly revenue since 2015.
Revenues rose 1 per cent from a year ago to C$1.6bn in the first quarter. Earnings a share slid to C$2.93 a share, from C$3.51 in the year-ago period but exceeded analysts’ estimates.
“We turned a corner in March and are now seeing positive volumes, which makes us cautiously optimistic that the demand environment is improving,” Keith Creel, chief executive, said.
A drop in natural gas prices had curbed demand for coal and weighed on the top and bottom lines of freight carriers. But a rise in gas prices and expectations of softer regulations for the coal industry under President Donald Trump were expected to help revive demand for coal.
Elsewhere, shares in American Express increased 5.9 per cent to $80.02 after posting a slimmer-than-expected fall in first-quarter profits and revenues, as higher cardholder spending and interest income dulled some of the impact of the loss of its co-branding relationship with Costco. That contributed 30 points to the price-weighted Dow Jones Industrial Average.
By close of trading in New York, the Dow was up 0.9 per cent to 20,578.71, while the S&P 500 rose 0.8 per cent to 2,355.84. The Nasdaq Composite climbed 0.9 per cent to 5,916.78.
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