CSX Reports 2nd Quarter Net Income Up

CSX reported this week that its net profit rose nearly 33 percent in the second quarter.

However, when controlling for the effects of $122 million in restructuring charges, the net profit was up just 15 percent.

Most of those charges involved reimbursing CEO E. Hunter Harrison and hedge fund Mantle Ridge for salary and benefits that Harrison gave up because his left his job as head of Canadian Pacific five months early.

Discounting the restructuring charges, CSX posted an operating ratio of 63.2 percent for the second quarter of 2017. Taking the restructuring charges into account, the operating ratio was 67.4 percent compared to 68.9 percent compared with the second quarter of 2016.

An operating ratio is a measure of company efficiency that compares operating expenses to net sales. The smaller the ratio, the greater a company’s ability to generate profit if its revenues fall.

Adjusting for restructuring charges, CSX expects a full-year operating ratio in the mid-60s,  with earnings per share growth of around 25 percent off the 2016 reported base of $1.81, and free cash flow before dividends of around $1.5 billion.

CSX reported revenue of $2.9 billion, an increase of 8 percent from $2.7 billion in the 2016 second quarter. Expenses fell 6 percent, led by a 15-percent drop in fuel costs.

The restructuring charges also included $22 million for management layoffs. The CSX management ranks have fallen by 951 employees this year.

CSX said that during the quarter its train velocity was up 3 percent compared with the same period in 2016.

Terminal dwell time was down 2 percent. On-time originations were 88 percent and on-time arrivals were 79 percent, a 14-percent gain over 2016.

During the second quarter of this year, CSX said it had an 8 percent increase in revenue following a 2 percent traffic increase. Freight rates were up nearly 4 percent.

CSX said its pricing and volume gains were led by export coal. Merchandise and intermodal pricing gains were 2.2 percent, which CSX said reflected the continued “challenging freight marketplace.”

Coal traffic was up 7 percent while intermodal rose 3 percent. Merchandise traffic fell 2 percent, which the railroad attributed to across-the-board declines in virtually every category.

For the quarter, CSX reported net earnings of $510 million, or 55 cents per share, up from $445 million, or 47 cents per share, a year ago. Excluding the restructuring charges, CSX reported earnings of 64 cents per share.

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