Shares of CSX Corporation (CSX) jumped in early trading after the company's first quarter results came in ahead of consensus forecasts. The rail operator's results were boosted by a significant drop in its operating ratio, with expenses at 63.7% of revenue vs. 73.2% a year ago.

RESULTS BEAT: After the market close on Tuesday, CSX said earnings per share for Q1 came in at 78c, above analysts' 66c expectation. Revenue for the quarter of $2.88B were in line with the $2.8B consensus. CSX's operating ratio for the quarter improved 950 basis points to 63.7% from 73.2% in the prior year, while expenses declined 13% year over year. In a statement, President and CEO James Foote said: "CSX employees did a great job of running the railroad and executing the scheduled railroading model during challenging weather conditions."

WHAT'S NOTABLE: Foote has only been at the helm of CSX for a few months following the death of former CEO Hunter Harrison, who pursued a turnaround at the rail operator. Harrison moved to make the railroad more efficient by idling excess equipment, running longer trains, making tighter schedules and closing down yards, which created massive bottlenecks, with long delays leading to production slowdowns at CSX customers. In response to the problems, the Surface Transportation Board required CSX to hold weekly discussions with it. On the company's quarterly conference call, Foote confirmed that CSX is no longer under the requirement to have weekly calls with the STB. "We have improved our service," he said, "and I expect that to continue." For the year, Foote expects revenue to be up "slightly," though he noted that there is "significant work ahead" in order to deliver on the company's 2020 target of a 60% operating ratio. Foote also said that the company is "drastically changing the way we operate the railroad by taking millions of unnecessary steps out of the business process that we use to run the railroad. This is producing record operating performance, improved customer service and, when combined, impressive returns to shareholders."

ANALYST COMMENTARY: Analysts were generally positive on CSX's earnings report, with Deutsche Bank analyst Amit Mehrotra calling the earnings release and conference call an "almost perfect" start to 2018 in a research note titled "Hunter would be proud; Blockbuster 1Q; Maintain Buy." Loop Capital analyst Rick Paterson, who raised his price target to $65 from $57, said the Q1 report may break the stock price out of its $50-$60 trading range. Stephens analyst Justin Long said "it is clear" CSX has moved past last year's "hiccups" related to the implementation of the Precision Scheduled Railroad operating model and is now beginning to see improvements in its bottom-line results and service metrics. However, Seaport Global said that while CSX is "moving in the right direction...We don't think that's enough upside from current levels to chase the stock." However, analyst Mark Levin feels that the "pretty darn good" quarter should give investors increased confidence that a sub-60 operating ratio by 2020 is "very doable."

PRICE ACTION: In early trading, CSX is up 5.6% to $59.75.