OMAHA, Neb. (AP) — CSX warned that it will be more difficult to reach its own profit targets for double-digit growth over the next two years because of ongoing weakness in demand for coal and because last year's results included several large, but one-time benefits.
The railroad last year booked gains from real estate sales, as well as damage payments from utilities that didn't ship enough coal under their contracts. Waning coal demand has gone on for longer than was expected, with so many utilities switching to natural gas and coal exports declining as Europe's economy struggles.
Chief Financial Officer Fredrik Eliasson said Thursday that those factors will make it more difficult to deliver on CSX's projected 10 percent to 15 percent growth in earnings per share from 2013 through 2015.
The company's fourth-quarter earnings declined 5 percent to $426 million on $3 billion revenue, which was short of Wall Street expectations.
Company shares fell more than 7 percent to $27.11 in afternoon trading.
Once coal shipments stabilize at the new lower level and CSX gets past last year's one-time real estate sales later this year, its results should improve.
"We think we've got another year of transition ahead," said Chairman and CEO Michael Ward.
Stifel Nicolaus stripped the company of its 'buy' rating Thursday and sees little in the way of potential returns over the next year.
"It is our hope that, sometime during the remainder of 2014, we will see a more attractive entry point for those wishing to establish positions or add to current positions in the company's common shares," wrote analyst John Larkin.
Citi's Christian Wetherbee backed his 'neutral' rating for the stock. He pointed to fourth-quarter growth rates that were basically in line with expectations and attributed the lighter net income to higher expenses.
CSX remains optimistic about its long-term prospects, citing the growth in shipments of intermodal shipping containers, building materials, and crude oil.
The company, based in Jacksonville, Fla., expects growth this year at a rate of between 2.7 percent and 3 percent. CSX predicts that total shipping volume should continue to grow in the current quarter.