CSX Pre-Announcement Disappoints

Yesterday, CSX Corporation (CSX) announced preliminary fourth quarter diluted EPS of roughly $0.90, excluding a $0.27 per share write-down in its investment of The Greenbrier resort in White Sulphur Springs, West Virginia -- up 6% from the $0.85 per share reported a year ago. This was well below consensus of $0.98 per share, our estimate of $0.99 per share, and previous CSX guidance of about $1.02-$1.12 per share.

Revenues were expected to be about $2.7 billion, up 4% year over year from $2.6 billion last year, and compared to consensus of $2.77 billion and our estimate of $2.76 billion. As expected, volumes were significantly lower, though higher yields and fuel surcharge recovery helped results.

Operating income rose approximately 16% to $692 million, with an operating ratio of 74.1%, a significant improvement over the 76.4% posted in last year’s fourth quarter.

The company will report its full fourth-quarter financials on January 20 after market close. We currently have a Buy on CSX, but are mulling a change in our recommendation as well as our 2009 EPS estimate.

However, we will reserve judgment until final results are released, as details are too sketchy at this point. We note that CSX will no longer provide long-term earnings guidance given the uncertainties related to the current economic downturn.