John123
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John123 in Gainers & Losers,

CSX CEO says industrial sector shows signs of stabilizing

No. 3 U.S. railroad CSX Corp (CSX) said on Wednesday its expects "mid-to-high single digit" freight volume declines in the second quarter due largely to slumping coal demand, but its top executive said there are signs America's industrial economy may avoid a recession.

"During the fourth quarter, there was a risk of an industrial recession," chief executive Michael Ward told Reuters in a telephone interview. "I wouldn't say it's recovering, but the industrial economy does seem to be healing."

"That side of the business remains a challenge, but it does seem to be stabilizing," he added.

Ward spoke to Reuters the day after the company posted a lower net profit in the first quarter that met market expectations. 

He pointed to the Purchasing Managers' Index for March, which rose to 51.8, as a sign of hope for the sector. A reading over 50 generally indicates the manufacturing economy is expanding. 

During a conference call with analysts on Wednesday, executives said they expected coal freight volumes to drop 25% in 2016 compared with the prior year. The company had previously expected coal volumes to drop 20% this year.

All the major U.S. railroads have been hurt by falling demand for coal, as utilities have switched to burning cheaper and cleaner natural gas amid low energy prices while the strong U.S. dollar has hurt coal exports.

Ward said the company's assumptions do not include the possibility of a hot summer season in the United States, which would boost demand for air conditioning and thereby increase the use of coal by utilities.

The company also sees ongoing strong U.S. auto sales and rising housing demand as positives for its full-year outlook.

The Jacksonville, Florida-based company has not yet given earnings guidance for 2016. But the CEO said despite a greater anticipated drop in coal volumes, cost-cutting and productivity gains should result in savings of $250 million that will offset that lost revenue.

"We're going to keep turning over every rock ... to help us on the productivity side," Ward said.

CSX shares closed up 4.2% at $26.03.

I like the CEO attitude to business. Will keep a look on this company.