U.S. Markets

CSX profit hit by trade-related weakness; shares slide after hours

LOS ANGELES (Reuters) - CSX Corp CSX.O on Tuesday posted quarterly profit that missed Wall Street's target and cut its full-year revenue forecast after weakness in its trade-related intermodal business weighed on results, sending shares down 6.1% in after-hours trade.

FILE PHOTO: A CSX coal train (R) moves past an idling CSX engine at the switchyard in Brunswick, Maryland October 16, 2012. REUTERS/Gary Cameron

CSX now expects 2019 revenue to fall 1%-2%. The Jacksonville, Florida-based company previously anticipated growth of 1%-2%.

Results from the third-largest U.S. railroad landed amid worries that a “freight recession” is under way in the U.S. transportation industry, which is broadly viewed as an economic bellwether.

Shares of CSX slid $4.85 to $74.70 after the closing bell.

U.S. truck and rail freight volumes were down in the first half of 2019 and appear to be deteriorating further as President Donald Trump’s ongoing trade war with China takes a toll on Main Street shopkeepers, Midwestern farmers and other domestic businesses.

“Analysis of U.S. rail traffic trends shows that most commodity groups have seen declines worsening in recent weeks,” CFRA Research analyst Jim Corridore said in a client note.

CSX Chief Executive James Foote told Reuters the economy is flashing “confusing” signs as U.S. companies grapple with uncertainty created by U.S. trade policies and other issues.

“There’s been a lot of angst and noise in the marketplace,” Foote said.

An 11% drop in intermodal - the segment that includes freight that moves from cargo ships or trucks to railroads - dragged CSX’s total revenue down 1% to $3.06 billion during the second quarter. CSX executives attributed a portion of the intermodal declines to the revamping of intermodal routes to boost profits.

U.S. importers, including retailers and automakers, late last year stockpiled goods made in China to avoid the Trump administration’s new tariffs.

Cargo container volumes at U.S. seaports are easing off 2018’s record levels as importers work through those inventories.

CSX serves most of the eastern third of the United States, including seaports in New York/New Jersey, Virginia and South Carolina.

Revenue from coal and metals shipments also were down during the quarter. Separately, a massive fire closed Philadelphia Energy Solutions Inc’s large East Coast oil refinery, affecting 1% of volume at CSX.

Net income slipped 0.8 percent to $870 million, or $1.08 per share, for the second quarter. Analysts had expected a profit of $1.11 per share, according to Refinitiv IBES data.

CSX’s pricing held up during the second quarter, but investors are bracing for a potential downturn as competing long-distance truck rates fall.

Reporting by Lisa Baertlein in Los Angeles; editing by G Crosse and Cynthia Osterman