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 per cent to 15 per cent growth in earnings per share from 2013 through 2015.
The company's fourth-quarter earnings declined 5 per cent to $426 million on $3 billion revenue, which was short of Wall Street expectations.
Company shares fell more than 7 per cent 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 per cent and 3 per cent. CSX predicts that total shipping volume should continue to grow in the current quarter.
The health of railroads, given the reliance of companies ranging from automotive to lumber and energy, can serve as an indicator of the broader economy.
During the last three months of 2013, CSX hauled 6 per cent more carloads of freight during the quarter.
Chemical shipments, which include the fast-growing crude oil segment, increased 18 per cent in the quarter, agricultural shipments surged 16 per cent and carloads of intermodal containers grew 11 per cent.
Still, growth has come with some consequences, particularly from oil shipments, which have grown significantly since 2009.
Following several fiery explosions federal regulators are weighing new standards for tank cars, which could build additional costs for railroads.
In July, 47 people were killed in Lac-Megantic, Quebec, when a train carrying Bakken crude derailed near the Maine border.
Federal investigators said this week that a derailment and fire in North Dakota late last month led to the loss of 400,000 gallons of oil.
Of particular concern is the volatile nature of crude from the Bakken fields in eastern Montana and western North Dakota.
But Ward expects that any new regulations are likely to focus on the tank cars — which are generally owned by chemical companies and leasing firms — and not on railroad operations.
"There may be some additional rules, but I don't expect anything burdensome," Ward said.
CSX Corp. operates more than 21,000 miles of track in 23 Eastern states and two Canadian provinces.
It's the first major freight railroad to release quarterly earnings. Norfolk Southern Corp. will release its fourth-quarter results next Wednesday, with Union Pacific Corp. the day after. The shares of all major railroad companies declined after the warning from CSX.
Follow Josh Funk online at www.twitter.com/funkwrite
CSX Corp.: www.csx.com