Cost Cutting Helps CSX Third-Quarter Results beat Expectations – Sells Suggested

Shares of CSX Corporation rose more than 3% in after hours trading on Wednesday after the transportation services company reported better-than-expected quarterly earnings  after the closing bell.

CSX’s third-quarter earnings fell to $455 million, or 48 cents a share, from $507 million, or 52 cents a share, a year earlier. Net profit for the railroad operator was hurt by the drop in revenue and freight volumes. During the three-month period through September, CSX’s revenue shrank 8% to $2.71 billion compared to the same quarter one year ago. Still, the results came in above market expectations of 45 cents EPS, on revenue of $2.69 billion.

The U.S’s third largest railroad transportation company observed a total decline of 8% in shipping volume across most of its goods categories including metals, equipment business and coal. Among decliners, coal shipments posted the worst performance, slipping 21% as a result of oversupply in the world market and a stronger U.S. dollar that made U.S. exports more expensive overseas.

Additionally, plunging fuel prices and increasing use of natural gas that is being encouraged by the government are putting pressure on coal demand and coal shipments. As natural gas produces less carbon dioxide than coal when burned, the U.S government has planned to get off coal used by power plants, to reduce emissions.

However, the Florida-based company’s third quarter’s data still bettered forecasts thanks to strong cost performance and productivity measures. The bottom line was helped by 6.8% cut in expenses, driven by $112 million of efficiency gains and $53 million of volume-related cost reductions.

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Fig: CSX D1 Technical chart

Shares of CSX Corp have been on a decline after reaching 15-month highs at around 31.28. In general, the shares are trading above the 20-day and 50-day MAs and the market is still in favor of buyers, as indicated by the RSI chart. Share prices are expected to reverse today, partly due to fundamental factors, but also because the price action has neared the short-term DMA20.

CSX Trade suggestion

Sell Stop at 31.00, Take profit at 30.50, Stop loss at 30.00

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