Wednesday, October 17, 2007

CSX Beats Estimates, "Reviewing" TCI Letter

What remains to be seen is how these results compare to those of its peers over the next few days. Both Burlington Northern (BNI) and Norfolk Southern (NSC) report next week.

CSX (CSX) recorded net income of $407 million, or 91 cents a share, compared with $328 million, or 71 cents a share, a year earlier. Results include 24 cents from discontinued operations. Year earlier EPS included a 17 cent gain from insurance settlements and the resolution of certain tax issues.

Freight volume fell 4% for the quarter, due to decreased demand for building products. Largest declines were in shipments of forest products, down 13%, and food and consumer goods, down 15%. Revenue per unit rose 8%, led by phosphates and fertilizers where it rose 27% because of "pricing and changes in the traffic mix." Total revenue climbed 3% to $2.5 billion.

Excluding a 24 cent per share gain for one time items, CSX earned 67 cents per share for the quarter, compared with 54 cents in the same quarter of 2006 after excluding 17 cents per share in items. The 67 cents came in above the EPS of 62 cents that Wall Street analysts had expected.

This is going to get real interesting when one considers yesterday's event and the TCI letter that became public. Will management wave these results in the air and tell them to essentially "piss off"? Will they take a "despite these record result, we are considering the proposals of the letter" tact? This has the potential to become very ugly very fast. If it does, do not worry. TCI will get the support it needs from shareholders and in the long run, based on its track record, we will be rewarded for our support.

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