CSX Corp (NYSE:CSX) stock surged over 5.1% on April 18th, 2018 in the pre market session (Source: Google finance) driven by solid bottom line wherein EPS surged 53% to $0.78 against adjusted EPS of $0.51 in pcp. Falling costs on flat revenues, led to a 19% improvement in operating income against the prior year’s adjusted results. The new lower cash rate and share count, fell over 4%, led to a major yoy rise. Their operating ratio enhanced 570 basis points to 63.7% against last year’s adjusted OR of 69.4%, which is a record first quarter. Falling cost in labor and MS&O partially offset by price.
Meanwhile, the ongoing efforts to monetize their surplus real estate portfolio led to a $32 million of real estate gains in the quarter against $2 million in the year-ago period. The group is targeting $300 million of cumulative real estate sales through 2020.
The equipment rents rose on the back of higher incidental rents, though we are continuing to drive days per load improvements to cut their car hire expense. Equity earnings were positive boosted by their affiliates and tax reform true-ups.
But, the locomotive fleet reductions enabled them to rightsize their contracted maintenance services agreement. Fewer crew starts and the more balanced network operating plan also led to reductions in ancillary costs like hotels, meals and taxis. The group has had a broader total workforce target for 2018 and beyond, while controlling labor footprint with savings from contractor and consultant reductions flowing to the MS&O line.
The Total revenue was flat as price, fuel surcharge and supplemental revenues offset a 4% fall in volume and negative mix. Capital investments showed their 3-year capital target of $4.8 billion, boosted by the reduced capital intensity of the scheduled railroading model.
Lastly, the group reported a decent performance driven by the core earnings growth, lower CapEx and lower cash taxes leading to a solid free cash flow conversion and $8.5 billion of cumulative free cash flow through 2020. They delivered a 10% rise in their quarterly dividend and enhanced share buyback program to $5 billion, with expected completion in the first quarter of 2019.