Image source: CSX.

Difficult times in the commodities markets have rippled out beyond their producers, hurting the companies that transport those goods as well. CSX (NASDAQ:CSX) has seen massive changes in its mix of business in response to those changing conditions, and as investors prepare for CSX's third-quarter earnings report on Tuesday, they should expect to see evidence of continued pressure on the railroad's revenue and profits. Yet what that report won't discuss is the possibility that a change in market direction could finally take away one of the key headwinds holding CSX's growth back. Let's take an early look at what CSX will likely have to say in its financial report.

Stats on CSX

Analyst EPS Estimate

$0.51

Change From Year-Ago EPS

0%

Revenue Estimate

$3.00 billion

Change From Year-Ago Revenue

(6.9%)

Earnings Beats in Past 4 Quarters

3

Source: Yahoo! Finance.

Can CSX get over the earnings hump?
Investors have been somewhat pessimistic about the prospects for CSX earnings to improve in recent months, pushing their third-quarter estimates down $0.02 per share and making downward shifts to their projections for the full 2016 year as well. The stock has remained under pressure, falling 8% since early July, but it has nevertheless bounced back from some more extensive losses during the market's recent swoon.

CSX's second-quarter results should give a fairly good indication of what investors can expect to see this time around. Revenue during that quarter was down 6% from the year-ago period, but the railroad made the most of its efforts to cut costs and improve profitability, generating record earnings. As we've seen for a long time now, coal volumes were especially weak because of low prices that sapped export demand and also led utility customers to choose alternatives for powering their plants. Strength in automotive shipments as well as intermodal transport volume weren't enough to offset weaker areas, but it nevertheless pointed to some bright spots with future potential.

One key element that has pushed CSX in both directions is the drop in energy prices. On one hand, energy's slump has cut fuel expenses for the railroad, helping to contribute to the bottom line. Yet the drop in revenue at CSX has come largely from declining fuel surcharges, with the railroad having been successful in the past at passing through some of their expenses to its customers. Moreover, weakness in oil leads producers to require fewer shipments of associated goods, such as fracking sand and other key chemicals for energy production.

Yet some of those who follow CSX now believe that the railroad industry overall is starting to see signs of a turnaround. First of all, commodities prices in several key markets have risen dramatically over the past week, pointing to the possibility of a recovery in the hard-hit materials sector that could spur greater production and therefore higher transportation volumes. In addition, fears that higher interest rates could hurt economic expansion now seem to be less likely to become a problem, as the Federal Reserve's recent signals suggest that the central bank will be slower in pushing rates higher than some market followers had believed.

Still, threats remain for CSX. Regulatory actions continue to require adoption of new technology to improve safety, and the potential for cost overruns stemming from implementing current and future regulation looms large over the entire railroad industry. Similarly, some of CSX's efforts to expand its capacity have met with opposition, and the results of pending litigation could have a big impact on its overall strategy.

In the CSX earnings report, be sure to keep an eye on what the company says about several important business initiatives. Company management said last quarter that it still believed that mid- to high-single-digit percentage growth in earnings was possible for the full year, despite the challenges that energy's slump has created. If oil prices follow through on their recent rebound, then it could be that despite the prospect of a return to higher fuel prices for its railroad operations, CSX will benefit from a return of fuel-surcharge revenue and greater demand for the energy-related materials that allowed the railroad to profit from energy's boom over the past several years.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends CSX. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.