The engine of global growth may suddenly feel like the big engine that won't, but one American rail company remains right on track.
Eastern U.S. rail carrier CSX
That 40% jump in earnings came with only an 18% increase in revenue, which points to impressive operational efficiency, and coincides with a reduction in the operating ratio of 250 basis points, to 75.2%. Railroads' track operating ratio, which is calculated as operating expenses divided by revenue, is a key metric. With a large percentage of revenue going to maintaining operations, cost control and efficiency are paramount. CSX aims to decrease that ratio to the high 60s by 2010.
If the domestic economy is slamming on the brakes, where did this revenue growth come from? It certainly did not come from the once-profitable business of hauling automobiles or construction supplies. As I mentioned last month, coal now accounts for nearly 30% of all revenue for CSX, and shipping Appalachian coal from miners like Massey Energy
Considering the strong earnings from Peabody Energy
Nearly 1,400 Motley Fool CAPS members, including 248 All-Stars, expect CSX to outperform the S&P 500. In all, the CAPS community has shared its collective insight on 21 rail companies. Join the free CAPS community today and share your views on how the rail industry will fare through the current financial crisis.
Fool contributor Christopher Barker captains yachts and writes about stocks. He can also be found blogging actively and acting Foolishly in the CAPS community under the user name TMFSinchiruna. He owns shares of Peabody Energy and Massey Energy. The Motley Fool has a disclosure policy.