Tuesday, July 13, 2010

CSX Finds Economy Better Than a Year Ago, but Conditions Still "Dynamic"

While the normal fuss and muss about Alcoa (AA) continues (in a shocker they actually beat), as I said yesterday I care a lot more about transports to figure out what is going on.  As an aside, Gartman on the Fast Money crew said AA cut 36,000 jobs in the recession ... that would even impress Jack Welch, especially considering Alcoa only has 59,000 employees as of last update on Yahoo Finance.  But a great representation of the gulf between the prospects of the U.S large corporation and U.S. (private sector) worker, and why they are living in 2 worlds.  But as stock market speculators we need not care about U.S. workers, all we care about is profits! Remember, in Wall Street nirvana all workers except C-level execs would be fired.  The profit surge would be outstanding, and politicians could become even more powerful as almost the entire populace depended on their handouts.    No worries readers - we're getting there slowly but surely.

CSX did not really add much new to the discussion on the economy but I was tickled to read some of the misleading lines in the stories on the report.  One such gem from a news source was something like "CSX bests analysts estimates as company benefits from dynamic U.S. economy".  I assume this writer once was employed by Wall Street or a certain beverage company that rhymes with Pool Dade.

Here is the actual quote

“While the economy remains dynamic, our markets overall continue to improve,” chairman and CEO Michael Ward.

Funny how switching a few words around can change the whole assessment. 

Some more commentary on and by CSX; seems like metals (i.e. sending railcars to America's sea ports so China can consume metal of any type) and autos were the strongest segments (remember Q2 2009 was a brutal period so year over year comparisons will be quite easy across the earnings season):
  • CSX, the third-largest railroad in the country, is the first among its peers to report earnings for the April-to-June period. Railroads' performance is an important window on the economy because trains carry so many things that consumers and businesses use every day -- from clothing to cars.
  • Shipping volume was up in every CSX category in the three-month period, except food and consumer shipments, which were flat.
  • Shipments of vehicles and parts jumped the most -- 63% compared with last year. U.S. auto sales slowed in June after a string of positive months, but they were still significantly above brutal 2009 levels.
  • Metal shipments, linked to the auto and construction markets, surged 44%.  "Growth was driven by rebounding steel consumption consistent with the gradual economic recovery," the company said. "Improved demand from automotive and energy markets, combined with low inventories and reduced imports pushed domestic steel production higher."
  • Shipments of lumber and other forest products, used in the still-shaky housing market, rose 2%.
  • The company's coal business volume lagged other markets, declining 4%, but coal-related revenue rose 12%. CSX said revenue per unit improved by longer hauling lengths. Export shipments were higher due to greater Asian demand, while domestic utility customer shipments were lower because of continuing high stockpiles of coal.
  • Revenue rose 22%.
Long time readers will know we stress coal/nat gas consumption as a real economic tell rather than fairy tales from government reports.  A real boom in industrial activity will lead to much higher demand in both these commodities.  The lack of any real rebound in nat gas prices (with massive inventories) along with coal prices mostly only benefiting from shipments to Asia, pretty much says it all about the domestic 'recovery'.  

All in all, this report fits the general mosaic, Asia leads - the West (ex South America) lags.  18 months ago the pundits screamed at you about "first in, first out - America shall lead the global recovery since it was the first into recession!".  That type of logic would make any first grader proud but we said nonsense - it's ostrich in the head thinking, and narcissistic to boot.  For the first time, Asia has led the world out of the depths of recession despite never seen before levels of spending/stimulus & "easy money" in the U.S.  This is a sea change ... and they really should replay on TV the parade of "analysts" who a year and a half ago insisted only the U.S. could lead any recovery with their dogmatic "first in, first out" song & dance.   Most of them still have their precious spots on financial infotainment TeeVee spewing their 'wisdom'.

No real guidance in the CSX report, perhaps something will be said in today's conference call.

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