CSX shares rise as railroad’s quarterly profit slightly tops estimates

Investing.com -- Shares of CSX Corp. rose by more than 2% in premarket U.S. trading on Friday, after the railroad operator reported third-quarter earnings that narrowly topped Wall Street expectations, despite lower coal prices and weaker merchandise shipments weighing on revenue.

CSXr posted earnings of $0.44 per share, a cent above analysts’ estimates. Revenue came in at $3.59 billion, flat against consensus but down 1% from a year earlier.

Total volumes ticked up 1% year-on-year to 1.61 million units, supported by intermodal growth, though export coal and merchandise volumes declined.

New Chief Executive Steve Angel said the company’s network is operating well and positioned to deliver long-term growth.

Investors were also focused on potential mergers, with Angel hinting that he would be considering any strategic options for the firm which made sense. Rumor has surrounded a possible tie-up between CSX and Berkshire Hathaway-owned BNSF, particularly in the wake of an as-yet unapproved $85 billion deal earlier this year bringing together rivals Union Pacific and Norfolk Southern.

However, a partnership announced in August between CSX and BNSF to fuse routes between the U.S. West and East Coasts quelled some of the speculation. Such arrangements have become more common in the rail industry, because they allow firms to expand services without having to undergo profound operational or structural changes to their businesses.

Still, CSX has faced pressure from activist investor Ancora Holdings to secure a merger with another railroad. CSX recently named Angel as a replacement for former boss Joe Hinrichs after Ancora called on the company to either pursue a tie-up or part with Hinrichs.

"Angel emphasized that CSXʼs focus will be on optimizing its operational, commercial, and financial opportunity set going forward. We couldn’t agree more," analysts at BMO Capital Markets said in a note.

"CSX has a self-help opportunity as it emerges from a challenging year, which, with strong execution, can deliver EPS/cash flow and valuation upside, ultimately positioning the company to negotiate from a position of strength when/if a consolidation opportunity emerges."

(Pratyush Thakur contributed reporting.)