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Despite a large drop in traffic volume and the deepening recession, CSX Corp. had a decent fourth quarter — just not as decent as Wall Street had hoped.

The Class I reported net earnings of $247 million, or 63 cents per share, compared with $365 million, or 86 cents per share, in fourth-quarter 2007. Earnings included a charge of 27 cents per share associated with a write-down of CSX’s investment in The Greenbrier resort in West Virginia. On a comparable basis, earnings increased 6 percent to 90 cents per share. Analysts had expected earnings of 91 cents per share, according to Thomson Reuters.

Although the full impact of the recession was evident in the quarter — from inventory corrections to weakening consumer demand — the Class I was able to mostly weather the storm because of strong core pricing, productivity gains and aggressive cost-control measures, CSX senior executives said during an earnings conference held this morning.

“Our focus on core pricing remains firm, supported by a strong service product and the relative value of rail,” said Chairman, President and Chief Executive Officer Michael Ward.

During the quarter, revenue rose 4 percent to $2.7 billion, operating income jumped 16 percent to $692 million and CSX’s consolidated operating ratio improved 2.4 points to 74.1 compared with fourth-quarter 2007 totals. Coal revenue jumped 24 percent, but automotive, intermodal and merchandise revenue fell 15 percent, 7 percent and 2 percent, respectively.

Volume declined 9 percent to 1.6 million units primarily because the housing and automotive markets continued to weaken, high commodity prices drove down phosphate demand, and reduced consumer spending and import volumes decreased intermodal traffic, said Executive Vice President of Sales and Marketing Clarence Gooden.

CSX’s expenses in the quarter were relatively flat at $1.98 billion vs. fourth-quarter 2007’s $1.97 billion. Fuel prices dropped significantly in the quarter, falling by 34 cents per gallon or 13 percent, said EVP and Chief Financial Officer Oscar Munoz.

For the full year, revenue rose 12 percent to a record $11.2 billion, operating income jumped 22 percent to an all-time-best $2.8 billion, operating expenses increased 9 percent to $8.5 billion and CSX’s consolidated operating ratio improved 2.1 points to a record 75.4 compared with 2007 figures.

Because of the economic downturn, CSX’s outlook for first-quarter revenue is “unfavorable,” said Gooden. The projection for revenue generation is favorable for agricultural products, neutral for coal/coke/iron ore and emerging markets, and unfavorable for all other markets, he said.

“Make no mistake, our environment will be challenging in 2009,” said Ward. “We realize we will have to make material adjustments in our business to be successful. We view this period as a chance to demonstrate that our fundamentals are sound.”

— Jeff Stagl