CSX Corp. (CSX) shares traded sharply lower Wednesday after the third-largest U.S. rail operator slashed its full-year revenue forecast amid slowing freight volumes linked to the ongoing trade dispute between Washington and Beijing.
CSX said earnings for the three months ending in June came in at $1.08 per share, up 7% from the same period last year but 3 cents shy of the Street consensus forecast. Group revenues, CSX said, slipped to $3.08 billion, missing analysts' forecasts thanks in part to trade-related weakness in its intermodal business.
Looking into 2019, CSX said it now sees full-year revenues falling between 1% and 2%, compared to its earlier forecasts of a similar growth rate, as freight volumes decline amid the ongoing U.S.-China trade dispute.
"Both global and U.S. economic conditions had been unusual this year, to say the least, and have impacted our volumes," CEO Jim Foote told investors on a conference call late Tuesday. "You see it every week in our reported carloads. The present economic backdrop is one of the most puzzling I have experienced in my career."
"We are seeing a range of conflicting data points and economic indicators and regularly speak with customers who despite the recent downtime -- slowdown, remain cautiously optimistic about the second half," he added. "We feel it is most prudent to actively manage expenses today rather than take a wait-and-see approach."
CSX shares were marked 8.22% lower Wednesday to change hands $73.01 each, a move that would still leave the stock some 19% higher for the year and value the Jacksonville, Florida-based transport group at around $60 billion.
"Although it shouldn't have come as a shock that CSX lowered its FY19 revenue guide (the weekly industry volume data has been telegraphing macro weakness for some time), investors balked at the shortfall in yields relative to expectations," said Credit Suisse analyst Allison Landry, who carries an 'outperform' rating on the stock with a $79.55 price target.
"We think investors will continue to view the rails as one of the few places within industrials with an idiosyncratic narrative that is independent of the macro," she added. We would agree, and as such, we're not yet willing to throw in the towel as it relates to our positive recommendation on CSX, or the sector as a whole."