CSX Profit Up 5.2% for Quarter The Increase Comes Despite a Lower Volume of Freight Hauled.

By TIMOTHY J. GIBBONS

CSX Corp. closed out 2007 with a quarter that boasted strong gains in safety and efficiency measurements, leading net profits to jump 5.2 percent from the last quarter of 2006.

The company projects much the same for this year, pointing to its ability to post a strong showing in what was a weak transportation- sector economy for much of 2007.

Pricing increases helped the Jacksonville-based railroad overcome weak volumes and large increases in fuel prices, adding up to net earnings of $365 million, compared with $347 million in the year- ago quarter. Earnings per share increased to 86 cents per share, from 75 cents a share a year ago.

This handily beat analyst estimates of 64 cents a share.

“It appears CSX has logged in an impressive quarter, despite stiff headwinds from the soft economy and higher fuel prices,” Lee Klaskow, an analyst with Longbow Research, wrote in a research note. “We attribute the majority of the upside to management’s ability to control costs in a declining freight environment, coupled with strong revenue growth.”

The 2007 final quarter included a penny per share from insurance gains, while the fourth quarter a year ago included 18 cents from insurance, property sales and tax issues. Excluding those amounts, earnings per share jumped 15 percent.

The earnings bump came despite the amount of freight the railroad carried dropping 3 percent for the quarter. Revenue, though, was up 8 percent from the year-ago quarter, bolstered by double-digit percentage increases in phosphates and fertilizers and in agricultural products, the only two sectors – both related to growth in the ethanol business – where volumes were up.

Safety improvements also showed up on the bottom line by allowing the company to reduce the amount of cash it must keep on hand for personal injuries by $56 million. This helped offset jumps in fuel – which the company said increased 75 cents per gallon – and in payouts related to accidents during the quarter.

The railroad plans on the same sort of year in 2008, Chief Executive Officer Michael Ward said. After raising prices for existing customers by an average 6.7 percent last year, the railroad anticipates 5 percent to 6 percent increases this year.

“Even though some people have some concerns about the economy, we expect another record year,” Ward said.

For the year, CSX had $1.3 billion in profit, a 2 percent increase from 2006. Earnings per share jumped 6 percent, from $2.82 a year ago to $2.99 for 2007.timothy.gibbons@jacksonville.com (904) 359-4103

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