Since eastern railroad operator CSX
Nevertheless, CSX posted strong second-quarter results after the bell yesterday. Revenue rose 12% over last year and ongoing operating improvements in this turnaround story continued to magnify that growth. The company's operating ratio improved once again and led to 23% growth in operating earnings (adjusted for the receipt of an insurance settlement). That, in turn, ultimately fueled adjusted EPS growth of about 21%.
Looking at incremental data throughout the past quarter, CSX will probably end up on the below-average side of the industry when it comes to carload growth. In fact, there was no volume growth this quarter. That 12% growth in overall revenue was purely pricing, with about half of that coming from true price increases (as opposed to fuel surcharges and product mix).
I was encouraged to see continued improvement in operating efficiency. On-time arrivals, dwell times, system velocity, and recrews all improved from year-ago levels. Remember, railroads have enormous fixed asset bases and even small incremental improvements in utilization can mean big things for operating income and cash flow growth.
With the whole industry having pulled back, investors who believe in the notion of sustainable improvements in this sector might want to take a look. You can select from quality operators like Burlington Northern
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).