Most CSX Shippers Reporting Service Issues

A survey of CSX shippers has found more than 80 percent of those responding saying they have experienced service issues since the company initiated the precision scheduled railroading operating philosophy of its CEO, E. Hunter Harrison.

The results were reported in Railway Age, which quoted Cowen & Company Managing Director Jason Seidl as saying that “nearly 40 percent [of respondents] have switched some freight to Norfolk Southern, and 67 percent have transferred freight to a trucker.”

Sidel said this could lead to NS gaining additional market share gains in the third quarter of 2017, prompting a 5 percent increase in NS earnings per share if it grabs as much as 5 percent of CSX traffic.

“Shippers are moving or have already moved freight off CSX where they can,” Seidl said.

Although 37 percent of survey respondents said they are switching at least some freight to NS, nearly 50 percent of those not captive to CSX are moving a piece of their business to NS and two-thirds of [responding] shippers are moving some freight from CSX to trucking company.

The survey found that 20 percent of shippers are shifting less than 25 percent of eligible freight to NS, while 14 percent are transferring between 25 percent and 50 percent of freight.

Just 5 percent of survey respondents said they were moving more than half of their traffic to NS and about 40 percent are moving less than 25 percent of their freight to trucks.

“Our view is that NS could meaningfully benefit from the service-related issues at CSX over the next couple of quarters,” Seidl said. “We continue to like the stock and see NS achieving its sub-65 OR (operating ratio) goal before 2020. NS should also have an easier time raising prices over the near-term as we think shippers would be willing to accept them for reliable service.”

Despite the problems that CSX had had, Seidl said he sees them as transitory. “While it is painful for many shippers today, we expect that over the next 12-18 months CSX customers will be more pleased with the railroad’s service quality. We do not think volumes that are lost to NS or a trucker during this transition period will be permanently lost.”

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