CSX Corp. and Norfolk Southern Corp. reported higher third-quarter profits Wednesday as gains in coal and merchandise revenue helped offset fuel costs and storm expenses.
Railroad companies CSX Corp. and Norfolk Southern Corp. reported higher third-quarter profits Wednesday as gains in coal and merchandise revenue helped offset higher fuel costs and storm expenses.
“The strong third-quarter results were particularly gratifying in light of the impact from Hurricane Katrina,” said Michael J. Ward, chief executive officer of Jacksonville, Fla.-based CSX, the nation’s third biggest railroad.
The hurricane-related shutdowns of Gulf Coast refineries and oil platforms led to soaring fuel costs, which have had an especially large impact on transportation companies. Katrina also forced both Eastern railroads to reroute traffic and clean up extensive damage.
Katrina, which made landfall near Buras, La., on Aug. 29, damaged a CSX line running 85 miles east of New Orleans and five major bridges. Repairs will continue till early next year. CSX says the total cost of the storm will total $250 million, but it has insurance that will cover the vast majority of the expenses.
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Norfolk Southern, the fourth biggest U.S. railroad operator, said Hurricane Katrina caused about $44 million in damage. After insurance, the company’s cost will be $12.5 million. Of that amount, $4 million was charged to the quarter and the rest will be counted as capital investment.
Norfolk Southern had to replace signals and repair two rail yards in Louisiana and Alabama. A 5.8-mile bridge between New Orleans and Slidell, La., was damaged but reopened within about two weeks.
Despite the storms, the two railroads benefited from an improving economy and spiraling demand for coal, which is used by utilities, steel plants and other manufacturers. Norfolk Southern, for example, set a quarterly record by carrying more than 451,000 carloads of coal.
But it was CSX that pulled in the stronger performance for the quarter. Its net income rose 33 percent to $164 million, or 72 cents per share, matching the estimate of analysts surveyed by Thomson First Call. That compared to earnings of $123 million, or 55 cents per share, in the year-ago period.
Revenue from its core surface-transportation business rose 9 percent to $2.13 billion in the quarter ended Sept. 30 from $1.94 billion, in the year-earlier period.
CSX’s coal revenue increased 16 percent to $491 million, while merchandise shipment revenue rose 8 percent to $1.05 billion.
Separately, CSX raised its quarterly dividend by 30 percent to 13 cents a share. The dividend will be paid Dec. 15 to shareholders of record on Nov. 25.
Norfolk Southern, based in Norfolk, Va., reported that its third-quarter profit rose 5 percent to $301 million, or 73 cents a share, from $288 million, or 72 cents per share, in the year-earlier period.
Fuel costs, followed by compensation and benefits, were largely behind the railroad’s rising expenses. An unfavorable jury verdict in the third quarter, which involved a worker’s injury at a Chicago rail yard, also contributed to the increase, the company said.
The company fell a penny short of the estimate of analysts surveyed by Thomson Financial.
Norfolk Southern’s revenue climbed 16 percent to $2.16 billion from $1.86 billion. Coal revenue rose 22 percent to $546 million. And revenue from general merchandise shipments — the company’s largest business — grew 13 percent to $1.14 billion.
Intermodal revenues rose 17 percent to $471 million, the highest of any quarter in the company’s history.
“My take on it is that it was a powerful quarter and it showed a lot of continued momentum for us at the same time that neither we nor anybody else knows precisely where the economy is going,” Goode said in a telephone interview.
Shares of Norfolk Southern fell $1.51, or 3.7 percent, to $38.89 in afternoon trading on the New York Stock Exchange. CSX shares rose 2 cents to $44.90 on the New York Stock Exchange.
Associated Press writer Sonja Barisic in Norfolk, Va., contributed to this report.