Source: CSX.

For years, railroad giant CSX (NASDAQ:CSX) has benefited from strong demand for rail transportation, as shipping customers sought to take advantage of the fuel-efficient shipping option compared to some alternative transportation methods. Coming into Tuesday afternoon's fourth-quarter financial report, CSX shareholders were confident that even with the recent plunge in crude oil prices, the net effect on CSX's business would be positive, as fuel-cost savings would outweigh any loss of shipment volumes from energy products. For now, CSX appears to have proven those optimistic views correct, with strong results that set new records for the company and largely matched what most had expected from the railroad. Let's take a closer look at CSX's latest results to see what investors should look for from the company in 2015.

CSX: Another quarter, another record performance 

CSX extended its streak of record results during the fourth quarter, setting new high-water marks for revenue and net income. On the sales front, CSX's top line came in at $3.19 billion, just a bit above what investors had looked for from the railroad and up 5% from year-ago levels. Net income climbed an even stronger 15% to $491 million, or $0.49 per share, matching expectations. The key operating ratio, which measures railroad efficiency, fell 1.4 percentage points from last year's levels to 71.8%, helping to support CSX's profitability.

Source: CSX.

Looking at CSX's individual business segments, the company touted strength across its spectrum of merchandise, intermodal, and coal. All three divisions saw revenue climb 6% in dollar terms, with a particularly impressive 11% volume gain for coal. Within the merchandise area, industrial chemicals and the waste-and-equipment division produced the greatest sales gains at 13%, but strength was broad-based, with only the automotive and food-and-consumer areas producing year-over-year revenue declines.

On the expense front, labor costs soared 13%, weighing on margins. But much of that rise came from initial charges connected to CSX's management workforce reduction program, with the expectation that its moves will produce long-term cost savings. Moreover, a 12% decline in fuel costs added $47 million to CSX's earnings, helping to keep overall expense growth down to just 3% and thereby produce better net-income growth for every dollar of revenue.

Unfortunately, CSX has continued to see many of the operational problems that it suffered earlier in the year. Just as we saw last quarter, on-time statistics remained at low levels, with originations falling to 52% from 85% last year and arrivals dropping to 43% from last year's 76%. Train velocities fell 2.5 miles per hour on average, and the length of waiting time in terminals, also known as dwell, jumped by 14% to 26.3 hours.

What's coming in 2015 for CSX?

Overall, CSX is excited about its past results and its future prospects. CEO Michael Ward especially emphasized CSX's success in "capturing broad-based market strength, completing strategic infrastructure projects and adding resources to further improve service performance and leverage growth opportunities." Even more impressively, Ward believes that CSX will be able to grow at a faster pace than the overall economy and maintain enough pricing power to boost real revenue further. By stressing both overall growth and margin expansion, CSX hopes to achieve double-digit gains in earnings per share while cutting its operating ratio downward toward the mid-60% range.

Source: CSX.

Specifically addressing CSX's operational challenges, the railroad expects service to improve toward higher levels because of its investments in improving its infrastructure quality, with attention on rails, locomotives, and operating employees alike. CSX's challenges are similar to what many of its peers have faced, as strong market conditions throughout the industry have left railroad companies scurrying for capacity.

One unanswered question, though, is how the recent drop in energy prices will play out. On one hand, fuel costs make up 11% to 12% of total revenue for CSX, and so further declines in fuel prices could have a marked impact on overall profitability. Yet at the same time, the railroad's chemicals shipments have largely relied on shipments of crude oil, liquefied propane gas, and fracking sand. If volumes of energy production decline because of lower prices, then the roughly 17% of revenue that comes from chemical shipments could fall along with it, potentially jeopardizing what has been a major source of growth. Moreover, although growth in coal revenue came mostly from seasonal inventory stockpiling at U.S. utility companies, weaker coal prices could jeopardize utility demand in the long run as well.

CSX's results were solid, and shareholders responded favorably immediately after the announcement, pushing shares upward by 1% in the first half-hour of after-market trading. Investors will have to wait and see, though, whether the effect of falling energy prices ends up helping CSX more than it hurts.