The Jacksonville, Fla.-based railroad on Tuesday reported $459 million net income, or 45 cents per share, on $2.96 billion in revenue. That beat Wall Street's expectations and topped last year's $449 million profit, or 43 cents per share.
Analysts surveyed by FactSet expected earnings of 40 cents per share on revenue of $2.92 billion.
CSX predicts its earnings will be relatively flat in 2013 but should grow 10 to 15 per cent in 2014 and 2015.
CSX plans to boost its quarterly dividend by a penny to 15 cents per share in June, and the railroad's board approved spending $1 billion to repurchase CSX stock.
"We are prepared for the economy to accelerate and have great confidence in the long-term outlook for the business," said CSX chairman, president and CEO Michael J. Ward.
CSX is the first major freight railroad to release first-quarter earnings. The number of carloads of chemicals, crops, lumber, coal, grain and containers of imported goods that railroads carry offers clues about the health of the broader economy.
Coal demand continues to be a concern for CSX and other railroads because relatively low natural gas prices have prompted some utilities to switch from coal to gas, while the sluggish economy has hurt industrial demand for coal.
CSX said coal revenue fell by 13 per cent to $726 million in the quarter as it delivered less to utilities. But exports of metallurgical coal, used in steel making, rose to 7 million tons over last year's 6.3 million tons.
Jefferies & Co. analyst Peter Nesvold said CSX's results should remind investors that railroads depend on more than just coal.
"It's true that CSX's domestic thermal coal volumes have been cut in half since past-peak. But the company's EPS (earnings per share) has more than doubled since that time," Nesvold said in a research note.
The railroad's intermodal revenue from shipments of containers transferred from ships and trucks to railroads grew 4 per cent in the quarter to $404 million.
And revenue from shipments of all other merchandise, which includes chemicals, automotive, construction and agricultural products, increased 2 per cent to $1.7 billion.
CSX operates over 21,000 miles of track in 23 eastern states and two Canadian provinces. The railroad's executives will hold a conference call with investors Wednesday morning.
Union Pacific Corp., the biggest railroad in the U.S., announces its first-quarter results on Thursday.
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CSX Corp.: www.csx.com