Signaling potentially good things for the larger economy, Eastern hauler CSX (NYSE: CSX ) paints a highly encouraging a picture of normalizing demand for freight transported by rail. Better yet, CSX is converting those improving conditions into greater value for shareholders.
The railroad operator unloaded a 48% surge in fourth-quarter earnings, delivering EPS of $1.14 that easily beat analysts' expectations for $1.09. It appears that the company's $1.5 billion share-repurchasing spree last year is paying off on a per-share basis. With so many companies recently diluting shareholders to tap capital when bank credit tightened, it's refreshing to see an outfit like CSX removing more than 5% of shares outstanding, especially during a year that also saw two dividend increases.
CSX's operating ratio crept upward sequentially, from 69.1% in the third quarter to 70% in the fourth. Still, the company targeted a "high-60s" performance for 2011 -- while reiterating its aim to achieve 65% by 2015.
When I examined western counterpart Union Pacific's (NYSE: UNP ) earnings last week, I noted a sharp sequential decline in that hauler's automotive volumes, which made me concerned about rebounding auto sales. CSX similarly saw some erosion in the growth rate of its comparable auto volumes in the fourth quarter, notching an 18% increase that's well beneath the full-year volume growth of 44%. Despite this leveling off, these figures don't provide us enough data to definitively say whether auto sales have begun to slump.
CSX's comparable coal volumes for all of 2010, meanwhile, equaled those from 2009. Even though eastern met-coal leaders like Alpha Natural Resources (NYSE: ANR ) and Massey Energy (NYSE: MEE ) stepped up their exports to satisfy hungry Asian markets in 2010, steam coal shipments languished as utilities worked their way through massive inventories accumulated during 2008 and 2009. Accordingly, CSX's 2010 shipments to domestic utilities actually declined by 6%, while export volumes surged 34%. Particularly in the wake of those devastating floods in Australia, Fools can expect export demand for U.S. coal to grow stronger still in 2011, making expansionary initiatives -- like CONSOL Energy's (NYSE: CNX ) proposed expansion of its Baltimore port facility -- all the more likely to move forward.
With earnings results from leaders like Canadian National Railway (NYSE: CNI ) and Norfolk Southern (NYSE: NSC ) still to consider, our quarterly portrait of domestic commercial freight movements is nearing completion. The colors thus far appear warm and inviting, but we'll have to step back several steps before we can discern what exactly this portrait depicts.