Posted by emirildan

CSX reported a 23 percent increase in earnings for the fourth quarter, compared with the same period last year. Revenue dropped 13 percent to $2.3 billion, another Blue chip registering a decline in revenue for the latest quarter. The company said in a statement that demand for coal remained weak in the quarter. But CSX has been added to the “better-than-expected” mantra of the past two years.

CSX cut its operating expenses by 20 percent, another popular theme on the Street to boost earnings, while the company’s operating ratio has expanded to 74.7 percent. So the company is becoming “lean and mean” and ready for earnings expansion when the U.S. economy begins to sputter out of recession (depression). The economic recovery in the U.S. May be key to CSX’s appeal to investors, then.

The company says it sees a sequential improvement in the US economy, but like all the other news releases from corporate CEOs, CSX doesn’t point to massive fiscal stimulus as the reason for the “recovery.” Will the Feds keep the money spout wide open? We’ll know in March.

The company has benefited from the Warren Buffet effect along with all the other major rails operating in the U.S. “If Buffet is betting on America, why shouldn’t you?” is the implied spin. Maybe Buffet had to shed as much cash as possible into any asset that offered real tangible assets on its balance sheet as well as an investment most likely produce earnings in a post-credit bubble environment. A falling dollar and the rehabilitation of the U.S. Manufacturing base is Buffet’s bet. Long term.

In other words, America needs to get a job. And the process will be slow, and so will CSX’s potential for capital gains. In the longer term, the company is a winner, but in the short term, it’s less clear.