Lockdowns around the world have brought manufacturing activities to a halt. The United States is no different. Manufacturing across the US has suffered lately. The drop in manufacturing has hit the prospects of railroad stocks like CSX Corporation. Expectations from the earnings results of railroad stocks have been low.
However, investors were in for a surprise when CSX reported its 1Q2020 results. Earnings per share came in at $1, higher than consensus estimates of 92 cents. The news boosted CSX’s stock by more than 15% in April 2020. Merchandise revenues were up 3% Y-o-Y while revenues from all other segments fell. Total revenue for the quarter was $2,855 million, 5% lower than the revenue from the same quarter last year. Cash and cash equivalents nearly doubled Q-o-Q to $1,995 million from $958 million back in December 2019. Net cash generated from operating activities remained steady as well on a Y-o-Y basis.
The second-quarter results are expected to be worse as they will reveal the extent of damage to the CSX rail business for the months of April and May of 2020. However, the situation is beginning to improve according to the company’s management. Kevin Boone, CFO, CSX Corporation, revealed recently that the company is starting to see small car orders. Boone also said, “This will be a slow ramp-up, and they (automakers) are focused on protecting their workforce as well. Certainly going zero to something is helpful.”
All eyes will now be on the re-opening plans of automotive plants across the US. Investors would note that businesses like CSX railroad keep the economy moving. CSX Corporation stock closed at $73.60 on May 27th, up 11.13% for the month. It has significantly outperformed the S&P500 in May, which is up 4.25%.